Bed Bath & Beyond bankruptcy: Here's what happens next

By James Rogers

Bed Bath & Beyond will honor coupons and rewards -- at least until Wednesday

Bed Bath & Beyond Inc. finally filed for chapter 11 Sunday after spending months teetering on the edge of bankruptcy.

The company and "certain of its subsidiaries" are now operating their business and managing their properties as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court, according to the SEC filing. Debtor-in-possession, or DIP, financing lets companies keep operating in chapter 11 bankruptcy.

The company has entered into a $240 million DIP term loan credit facility from Sixth Street Specialty Lending Inc. (TSLX), Sixth Street Lending Partners and TAO Talents, if approved by the bankruptcy court.

Bed Bath & Beyond (BBBY) also expects to receive a Nasdaq delisting notice, according to Monday's filing. "If the company receives such notice, the company does not intend to appeal Nasdaq's determination and, therefore, it is expected that its common stock will be delisted," it said, in the filing. "The delisting of the common stock would not affect the company's operations or business and does not presently change its reporting requirements under the rules of the Securities and Exchange Commission."

Bed Bath & Beyond's stock, which closed at 28 cents Friday, plunged 23.4% Monday.

Bed Bath & Beyond: from home-goods behemoth to bankruptcy

In the filing, Bed Bath & Beyond explained that interim CFO Holly Etlin has been appointed CFO and Chief Restructuring Officer. In her capacity as CRO, Etlin will be responsible for overseeing the company's court-supervised liquidation and sale process.

In a statement released Sunday, Bed Bath & Beyond said it intends to use the chapter 11 proceedings "to conduct a limited sale and marketing process for some or all of its assets."

"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 & Beyond said, in its statement.

After news of the bankruptcy broke, a number of Twitter users turned their attention to the company's famous 20%-off coupons and whether they will still be honored.

"Through the filing of customary motions with the court, the company intends to uphold its commitments to customers, employees, and partners, including continued payment of employee wages and benefits, maintaining customer programs, and honoring obligations to critical vendors," Bed Bath & Beyond said, in its statement Sunday.

In a chapter 11 FAQ section on the company's website, Bed Bath & Beyond said that it expects to stop accepting coupons on Wednesday, when the company will start its store closing sales.

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James Gellert, CEO of RapidRatings, a company that assesses the finances of public and private companies said Bed Bath & Beyond's bankruptcy is hardly surprising, given its struggles to keep pace with online retailers and declining sales in recent years. "We first noticed signs of financial decline for BBBY as early as 2018," he said, in a statement emailed to MarketWatch. "Today, the company is rated at just 25 out of 100, placing it firmly in our High-Risk zone where more than 90% of companies ultimately fail."

Bed Bath & Beyond serves as "a stark reminder" to all traditional brick-and-mortar stores, according to Gellert. "Adapt to the fast-paced demands of modern consumers or risk sinking in today's hyper-competitive retail environment," he added.

Gellert also believes Bed Bath & Beyond's financial struggles are emblematic of the challenges faced by highly-leveraged companies in the current economic climate. "Despite its efforts to refinance its debt, the company has been unable to secure the capital required to maintain its operations," he wrote. "This issue is becoming increasingly common among both public and private companies, as a multitude of factors--such as inflation and materially higher interest rates--have impacted operations and created unsustainable debt capital structures."

Bed Bath & Beyond announced another equity offering earlier this year, which came after a troubled couple of years marked by strategic missteps, cash burn, challenging underlying business trends and the impact of the COVID-19 pandemic.

Bed Bath & Beyond also recently disclosed a sale of more than 100 million shares as it attempted to stave off bankruptcy.

Related: Bed Bath & Beyond Inc. leads premarket movers with bankruptcy filing

Ultimately, though, Bed Bath & Beyond's attempts to dodge chapter 11 were unsuccessful. "BBBY has made a heroic, yet likely Quixotic, attempt to avoid bankruptcy," wrote RapidRatings' Gellert.

Additional reporting by Ciara Linnane.

-James Rogers

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04-25-23 0813ET

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