Bed Bath & Beyond said in a filing on Thursday that it received a notice of default from its lender, JPMorgan Chase, and admitted to not having sufficient funds to repay what it owes.
The retailer was informed by JPMorgan Chase on Wednesday that its debts were due immediately under the credit agreement.
According to the Securities & Exchange Commission filing, Bed Bath & Beyond defaulted on or around Jan. 13. As a result, creditors are demanding immediate payment.
Bed Bath & Beyond revealed in the filing that the default would force it to consider all strategic alternatives, including restructuring its debt in bankruptcy court.
“While not completely unexpected, today’s default notice … underlines the company is living on both borrowed time and money,” said Neil Saunders, managing director of GlobalData.
“Its fate will now ultimately be decided by creditors who are demanding repayment of some debt and further collateral.”
The home goods retailer added that it is also cutting costs, lowering capital expenditures, and closing stores and distribution centers.
The retailer’s outstanding borrowings under an asset-backed loan and first-in-last-out loan (FILO) were $550 million and $375 million, respectively, as of Nov. 26.
In the latest filing, Bed Bath & Beyond expressed concerns about its ability to continue operating.
“Based on recurring losses from operations and negative cash flows from operations for the nine months ended November 26, 2022 as well as current cash and liquidity projections, the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for the next 12 months,” the filing said.
The retailer previously warned of a potential bankruptcy filing on Jan. 5 to address its plunging sales.
Bed Bath & Beyond has been struggling due to the weakening of the economy as shoppers are tightening their purse strings. Turning around the company is expected to be difficult amid increasing competition from discounters.
The company’s recently appointed CEO and president, Sue Gove, blamed the poor performance on inventory constraints and reduced credit limits that resulted in shortages of merchandise on store shelves.
Bed Bath & Beyond announced in August that it would close stores and lay off workers in a bid to turn around its business. It announced it would close about 150 of its namesakes stores and slashed its workforce by 20 percent.
As of February 2022, Bed Bath & Beyond had 950 stores and 32,000 workers. The company also owns children’s retailer buybuy Baby.
The Associated Press and Reuters contributed to this report.
