Customers shop at a Bed Bath & Beyond store in Forest Park, Ill.
Scott Olson/Getty Images
Bed Bath & Beyond
continues to teeter on the brink of bankruptcy. On Thursday, the company said it had triggered “certain events of default” earlier this month.
Bed Bath (ticker:
BBBY
) said that happened around Jan. 13, when the company was unable to prepay a so-called overadvance on a credit facility and satisfy a financial covenant, among other things.
As a result, representatives of the lenders told the company on Wednesday that the principal amount of all outstanding loans under this agreement was “due and payable immediately.” In addition, all outstanding loans under the facility will bear interest at an additional default rate of 2% per annum.
In Thursday’s filing, the company said that as of Nov. 26, it owed $550 million and $375 million under two separate credit facilities. In total, the company has $2.57 billion in current liabilities, according to the filing.
“At this time, the Company does not have sufficient resources to repay the amounts under the Credit Facilities and this will lead the Company to consider all
strategic alternatives, including restructuring its debt under the U.S. Bankruptcy Code,” Bed Bath said in the filing.
Bed Bath said it is undertaking a number of actions to improve its financial position, including cutting costs, lowering capital expenditures, and reducing its store footprint, but the measures “may not be successful,” the company said in the filing.
The disclosure came in the company’s quarterly 10-Q filing with the Securities and Exchange Commission. Earlier in January, Bed Bath said it wasn’t going to be able to file the 10-Q in time to meet SEC requirements, prompting the
Nasdaq Stock Market
to send a notice warning the company it was at risk of being delisted. In the same filing earlier this month, Bed Bath warned investors for the first time that it was considering filing for bankruptcy.
The stock closed 22% lower at $2.47 on Thursday, after being halted multiple times in response to volatility in the price. The shares have been on a wild ride since early January, at one point gaining over 160% in intraday trading as retail investors rallied behind the shares.
Bed Bath’s senior notes due 2024, 2034, and 2044 were all trading at under 10 cents on the dollar, suggesting bondholders expect much of their value to be wiped out.
The biggest question for stakeholders now is whether they can expect to be repaid or not. Aside from lenders, the company may also have outstanding debts with vendors, service providers, and other stakeholders, said Deborah Weinswig, CEO of Coresight Research, which focuses on retail and technology.
“Everyone’s lining up and trying to figure out where they are in the stack,” Weinswig said.
The company has said it is evaluating multiple options, including filing for Chapter 11 bankruptcy. But bankruptcy procedures can be expensive and tends to require companies have a good chunk of cash on hand—something that Bed Bath is short on.
The company may also explore selling itself. Bloomberg has reported that management was in talks with potential buyers. The company said at the time it didn’t comment on speculation.
What happens next is still anyone’s guess. Cases like these “never end up where you think it’s going to be,” Weinswig said. “I guarantee that out of 10 likely scenarios, it’ll be like the 11th.”
Write to Sabrina Escobar at sabrina.escobar@barrons.com
Credit: marketwatch.com