Bed Bath & Beyond on Sunday filed for Chapter 11 bankruptcy protection after a series of last-ditch efforts to raise enough equity to keep the business alive failed at the eleventh hour.
The struggling home goods retailer has been warning of a potential bankruptcy since early January, when it issued a “going concern” notice that it may not have the cash to cover expenses after a dismal holiday season.
“Bed Bath & Beyond Inc.today announced that it and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey to implement an orderly wind down of its businesses while conducting a limited marketing process to solicit interest in one or more sales of some or all of its assets,” a statement Sunday read.
“The Company’s 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites will remain open and continue serving customers as the Company begins its efforts to effectuate the closure of its retail locations.”
Bed Bath has been hanging on by a thread ever since but has refused to go down without a fight. It secured what was then-considered a Hail Mary stock offering in early February that was expected to infuse more than $1 billion in equity into Bed Bath, but the plan faltered and brought in only $360 million, the company said.
At the end of March, Bed Bath announced another stock offering it hoped would bring in $300 million, but that news sent the share price tumbling and it struggled to raise the funds it hoped the offering would provide. As of April 10, the company had sold approximately 100.1 million shares and raised only $48.5 million.
In filings, the company warned if it didn’t raise the anticipated proceeds from the offering, it would likely have to file for bankruptcy protection.
Days after the second stock offering was announced, Bed Bath said it had partnered with liquidator Hilco Global to boost its inventory levels. Under the agreement, Hilco subsidiary ReStore Capital agreed to buy up to $120 million in merchandise from the company’s key suppliers after relationships with Bed Bath’s vendors soured because of its liquidity issues.
However, the plans ultimately proved futile and weren’t enough to keep the lights on.
The retailer has struggled to maintain relationships with its vendors and has been grappling with low inventory levels, lagging sales and a rapidly dwindling cash pile.
Going into the holiday season, Bed Bath had difficulty keeping its shelves stocked and because of its liquidity issues, some vendors began asking for prepayments, the company said in securities filings.
CEO Sue Grove had been leading the company through an attempted turnaround she hoped could save the business, but those efforts coincided with high inflation that affected consumer spending while rising interest rates slowed the housing market.
Plus, consumers who had spent 2020 and 2021 staying at home and updating their living spaces amid the pandemic were now spending on travel, eating out and other out-of-home experiences.
In mid-January, the company was looking to find a buyer willing to keep it afloat with an infusion of cash. Soon, though, Bed Bath revealed in a securities filing that it didn’t have enough cash to pay its debts and had defaulted on its credit line with JPMorgan.
The company was able to make its interest payments using funding gained from the first stock offering, but at the time it warned it would “likely” have to file for bankruptcy and see its assets liquidated if the deal didn’t go as planned.
The company had loans with JPMorgan and lender Sixth Street that were reduced in late March after its second stock offering was announced. At the time, its total revolving commitment decreased from $565 million to $300 million and its revolving credit facility was reduced from $225 million to $175 million. Under the reduced credit agreements, Bed Bath was on the hook for monthly interest payments.
The company said it was attempting to lower costs by reducing capital expenditures, closing stores and negotiating lease deals but warned in filings the efforts “may not be successful.”
At a popular Bed Bath outpost in New York City, a since laid-off staffer recently told CNBC that workers were standing around not knowing what to do after the company suddenly cut off in-store pickup and deliveries at the location. The worker was told liquidators would be coming the following day and soon learned employees wouldn’t receive severance after more than two decades with the company.
“It was just so fast,” the worker said.