Jan 5 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) is preparing to seek bankruptcy protection in the coming weeks, people familiar with the matter said, following weak sales and an inability to compete major online and big-box retailers.
The U.S. home goods retailer plans to skip debt payments due Feb. 1, one of the sources said, a typical move struggling businesses on the verge of bankruptcy take to conserve cash.
Shares of the retailer, once a category killer in products like small appliances and bed linens, ended down 30% on Thursday at $1.69 after the company said it expected report a material loss in the third quarter and that there was substantial doubt about its ability to continue as a going concern.
The company said it was exploring a range of options to deal with falling sales, including filing for bankruptcy. The retailer said it has made no final decision on which way to go.
Bed Bath & Beyond had no immediate comment on the bankruptcy preparations beyond its disclosure on Thursday.
The company has interest payments on about $1.5 billion in bonds due Feb. 1, according to securities filings. The company is considering withholding the payment to save money, which would likely trigger a 30-day grace period before the company officially defaults, the sources said.
Struggling retailers often file for bankruptcy protection after the holiday season to take advantage of the cash cushion provided by recent sales. If the company filed for bankruptcy protection, it would likely seek financing from existing creditors to help it navigate a court-ordered restructuring, one of the people said.
The retailer’s fortunes soured after it pursued a strategy focused on its own private label products. Management has since backtracked to bring in buyers from recognized national brands.
But on Thursday, signs emerged that this strategy has also failed to take off, with the company reporting that it expects to post a loss of $385.5 million after sales fell 33%. for the quarter ending November 26, due to lower customer traffic and reduced levels. inventory availability among other factors.
The company is due to release its full third-quarter results on Tuesday.
“The turnaround plan put in place last year is not working. (…) Frankly speaking, the company is moving at high speed in the wrong direction, with bankruptcy being the most likely destination,” Neil said. Saunders, analyst at GlobalData.
Bed Bath & Beyond has tapped turnaround and advisory firm AlixPartners LLP to help it find options to resolve its financial issues, people familiar with the matter said.
In addition to AlixPartners, the company is advised by restructuring lawyers at Kirkland & Ellis LLP and investment bankers at Lazard Ltd (LAZ.N), one of the people said.
AlixPartners and Lazard declined to comment. Kirkland did not immediately respond to a request for comment. In a statement to Reuters on Thursday evening, Bed Bath & Beyond said it was “working with strategic advisers to assess all avenues to regain market share and improve liquidity”, but could not comment further on the relationship. specific.
The company became a meme stock last year when its shares soared more than 400%. Activist investor Ryan Cohen, chairman of GameStop Corp (GME.N), took a stake in Bed Bath & Beyond, which he later sold, sending the stock plummeting.
Bed Bath & Beyond, in its previous fall financial update, said it had cash of $850 million, but spent $325 million in the second quarter.
The company had also asked bondholders to swap their holdings for new debt to give it more leeway to turn around its business, but called off the deal on Thursday after it didn’t garner much interest. from investors, according to documents filed with the U.S. Securities and Exchange. Commission.
Bed Bath & Beyond had previously considered selling off its prized buybuy Baby stores which sell products for infants and toddlers, but waited in the hope that it might later fetch a higher price, Reuters reported.
buybuy Baby is the company’s “crown jewel” asset and would likely generate the most interest from buyers should the parent company decide to sell it as part of its restructuring efforts, Michael said. Baker, senior research analyst at DA Davidson, without providing a goodwill estimate.
The chain’s value helped the retailer sign a $375 million loan last year, the maximum amount it could borrow.
Reporting by Aishwarya Venugopal in Bengaluru and Siddharth Cavale in New York; Editing by Shounak Dasgupta, Subhranshu Sahu, Mark Porter and Anna Driver
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