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Bed Bath & Beyond: After experiencing yet another huge setback on Thursday, Bed Bath & Beyond announced a developing crisis.
The firm claimed that it lacked the money to pay its debts in full.
A dreadful bankruptcy notice was issued as a result of the company failing to make payments on its JPMorgan credit line.
Later on Thursday after hours, shares of Bed Bath & Beyond dropped, momentarily halting trading.
The market value of the shares dropped by 22% to close at about $295 million.
The news
In a securities filing, Bed Bath & Beyond stated that it lacked the funds to repay the debts secured by the Credit Facilities.
Without sufficient resources, the company might need to consider other options.
One of its options is to restructure its obligations in line with the US Bankruptcy Code.
Bed Bath & Beyond is now working to cut costs by doing a range of actions, like:
- Closing stores
- Lowering capital expenditures
- Negotiating lease deals with landlords
The company did issue a warning, noting that the measures might not be successful.
Challenging times
Bed Bath & Beyond’s most recent filing is even more proof that the retail company’s time is running out as sales are underwhelming and debts are piling up.
Additionally, it occurs amid a time of economic change when inflation has been putting a pressure on consumers’ budgets.
Furthermore, people are spending more on leisure and travel than on household goods.
Bed Bath & Beyond also experienced problems because it required early payments in the second quarter of its fiscal year, which resulted in a reduction in credit limits and tightening of credit conditions.
According to the filing, they prevented the company from adequately storing goods in advance of the holiday season.
Additionally, Bed Bath & Beyond made clear that suppliers had to make prepayments.
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Debt
The outstanding balance on the asset-backed loan with JPMorgan is $550 million.
In addition, as a result of the credit facility’s expansion in August 2022, Bed Bath & Beyond owes Sixth Street $375 million.
The amount of unsecured notes included in the company’s debt is around $1.2 billion.
The notes have been trading at depreciated prices as of their maturity dates, which are spread throughout 2024, 2034, and 2044.
Bed Bath & Beyond informed investors that it expected to utilize more credit to cover its obligations less than a month later, but then stated that the company was unable to restructure part of its debt.
The business has recently made large spending.
Bed Bath & Beyond made cash payments totaling $890 million on Thursday for the nine months that came to an end on November 26.
The company stated that as of that time, it still had $225.7 million in cash.
Early warning
Earlier this month, Bed Bath & Beyond warned that the company was considering filing for bankruptcy owing to a shortage of funds.
Sales were lower than expected, which increased the risk that the company wouldn’t have enough cash on hand to cover its expenses.
At the time, CEO Sue Gove stated that revamping Bed Bath & Beyond and ensuring that its brands remained the top choice with consumers were the company’s top priority.
The Thursday update follows Bed Bath & Beyond’s “going concern” warning about not being able to fulfill payments after the worse-than-expected quarter.
Other options
Recently, Bed Bath & Beyond has began exploring options.
In case it needs to file for bankruptcy, the company is considering finding funding to keep it afloat.
The firm is currently undergoing a sales process in an effort to attract a buyer and support keeping its doors open for large chains.
In case it becomes necessary to file for bankruptcy, Bed Bath & Beyond is also searching for lenders who may provide funding to keep the company afloat.
“Multiple paths are being explored, and we are determining our next steps thoroughly, and in a timely manner,” a spokeswoman said last week.
Sycamore Partners, a private equity firm, has shown an interest in buying the company.
The corporation is intrigued by Buybuy Baby, which has outperformed the larger company.
Future survival of Buybuy Baby is anticipated, according to sources.
