Bed Bath & Beyond set to file for bankruptcy in a matter of weeks: sources

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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 poor sales and an inability to compete with big retailers. online and large surfaces.

The US home goods retailer is considering skipping debt payments due on February 1, one of the sources said, a typical move struggling companies on the brink of bankruptcy make to conserve cash .

Shares of the retailer, once a category killer in products like small appliances and linens, ended down 30% on Thursday at $1.69 after the company said it expected to report a significant loss in the third quarter and that there were substantial doubts about its ability to continue as a going concern.

The company said it was exploring a variety of options to address declining sales, including filing for bankruptcy. The retailer said he hasn’t made any final decisions on which course to take.

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 of bonds due February 1, according to securities filings. The company is considering skipping the payment to conserve cash, which would likely trigger a 30-day grace period before the company officially defaults, the people said.

Struggling retailers often seek bankruptcy protection after the holiday season to take advantage of the cash cushion provided by recent sales. If the company were to seek bankruptcy protection, it would likely seek financing from existing creditors to help it navigate a judicial 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 changed course to attract buyers of well-known national brands.

But on Thursday, signs emerged that this strategy hasn’t gotten off the ground either, with the company reporting that it expects to post a loss of $385.5 million after sales fell 33% in the quarter ended Nov. 26 due to lower customer traffic and reduced levels. inventory availability among other factors.

The company is scheduled to report its full third-quarter results on Tuesday.

“The restructuring plan put in place last year is not working… Put bluntly, the business is moving fast in the wrong direction and bankruptcy is the most likely fate,” said GlobalData analyst Neil Saunders.

Bed Bath & Beyond has hired recovery and consulting firm AlixPartners LLP to help advise on options to address its financial woes, people familiar with the matter said.

In addition to AlixPartners, the company is being advised by restructuring lawyers from Kirkland & Ellis LLP and investment bankers from 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 night, 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 specific relationships.

The company became a stock meme last year when its shares soared more than 400%. Activist investor Ryan Cohen, president of GameStop Corp (GME.N), took a stake in Bed Bath & Beyond, which he later sold, sending the stock tumbling.

Bed Bath & Beyond in its previous financial update in the fall said it had liquidity of $850 million but had spent $325 million in the second quarter.

The company had also been asking bondholders to swap their holdings for new debt to give it more breathing room and turn around its business, but it canceled the deal Thursday after not garnering much interest from investors, according to filings with the US Securities and Exchange Commission.

Bed Bath & Beyond had previously considered selling its valued BuyBuy Baby stores that sell baby and toddler products, but stopped in the hope that it could then 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, said Michael Baker, a senior research analyst. by DA Davidson, without providing information. a business valuation.

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; Edited by Shounak Dasgupta, Subhranshu Sahu, Mark Porter, and Anna Driver

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jessica dinapoli

Thomson Reuters

New York-based reporter covering US consumer products ranging from paper towels to packaged foods, the companies that make them, and how they are responding to the economy. Previously reported on corporate boards and distressed companies.

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