According to people familiar with the matter, Bed Bath & Beyond has been in talks with potential buyers and lenders to keep its business afloat during a likely bankruptcy filing.
The retailer is in the midst of a sale process in hopes of finding a buyer who would keep the doors open for its two major chains, its eponymous Banner and Buybuy Baby, the people who were not authorized to publicly commit to the matter said to discuss.
At the same time, Bed Bath was also looking for a lender to provide financing that would keep the company afloat if it filed for bankruptcy protection in the coming weeks, the people said.
A Bed Bath spokeswoman said Wednesday the company is not commenting on specific relationships but is working with strategic advisors to evaluate all avenues to regain market share and improve liquidity.
“Multiple avenues are being explored and we are thoroughly and timely determining our next steps,” the spokeswoman said, declining to comment further.
A representative for AlixPartners, which CNBC recently reported has been hired as an advisor to the company, declined to comment.
Earlier this month, Bed Bath warned it may have to file for bankruptcy after its turnaround plans failed to significantly increase sales and repair its balance sheet. The company reported net losses of over $1.12 billion for the first nine months of the fiscal year. The company has drained its cash in recent months, taken on a heavy debt load and faced strained relationships with its suppliers.
Comparable sales declined 32% year over year for the most recent fiscal quarter ended November 26. Company leaders said the company has had a harder time keeping shelves stocked as vendors change payment terms or decide not to ship goods due to the retailer’s financial challenges.
Last week, CNBC reported that Bed Bath had begun another round of layoffs to further cut costs. As of February 26, 2022, the company had around 32,000 employees, according to public records.
The company has been working to find a way to allow its chains to survive, people added. The day before Bed Bath issued a “going concern” warning, it announced in an employee memo that it had hired Shawn Hummell, a former Macy’s executive, to oversee the retail, store and merchandising operations of its namesake to lead the brand as Senior Vice President of Stores. Prior to Macy’s, Hummell worked for Abercrombie & Fitch, another retailer that was undergoing a turnaround.
One possible buyer circling Bed Bath is private equity firm Sycamore Partners, according to people familiar with the talks. Sycamore is particularly interested in Buybuy Baby, Bed Bath’s infant and toddler banner, which has outperformed the broader company. Buybuy Baby is considered the most likely to survive in the future, people said.
Still, a sale of Bed Bath as a whole remains on the table – albeit with a much smaller number of stores than it currently has, people said.
Sycamore is known for taking over retailers like women’s clothing chain Talbots, including distressed companies that have filed for bankruptcy, like Ascena’s Ann Taylor. A spokesman for Sycamore Partners declined to comment. Dealbook previously reported Sycamore’s interest in Buybuy Baby.
Bed Bath has also attracted interest from companies acquiring companies’ intellectual property or trademarks, particularly from companies in distress, the people said. Authentic Brands, which has attended many bankruptcy retailer bankruptcy sales like Forever 21, was also looking at Bed Bath, people said. A representative from Authentic Brands did not immediately respond to the comment.
Ahead of a sale, the company and its advisors have been trying to find additional financing for a bankruptcy filing that could come in the coming weeks, the people said. The company’s advisors are looking for a loan of at least $100 million, one of the people said.
Last year, Bed Bath received $375 million in new funding from lender Sixth Street Partners, which has funded other retailers including JC Penney and Designer Brands.
The Sixth Street facility could be turned into bankruptcy financing, the people said, or the lender or others could convert their debt into equity and become the owner of Bed Bath. A Sixth Street representative declined to comment.
Bed Bath’s funding strategy comes as fellow retailer Party City filed for Chapter 11 protection this week. Even with a heavy debt burden, Party City wants to restructure its balance sheet and move forward with a smaller footprint.
Bankruptcy attorney Eric Snyder of the Wilk Auslander law firm said a sale was unrealistic for Bed Bath given its declining sales and inventories and its widening losses.
“They don’t have the ability to fix the ship and they don’t have the money to continue operations,” Snyder said. “I just don’t see any other option than bankruptcy and liquidation.”
– CNBC’s Melissa Repko contributed to this report.