Bed Bath & Beyond says it received default notice from JPMorgan

Bed Bath & Beyond said it received a notice of default from JPMorgan and did not have enough cash to repay debts of more than $1bn to the lender, pushing the US home goods retailer a step closer to a potential bankruptcy.

The company said in a Securities and Exchange Commission filing on Thursday that it had received a notice of acceleration and default from JPMorgan, which determined the retailer had breached its loan covenants and was now demanding the principal amount of all its outstanding loans to the group.

Bed Bath & Beyond had about $1.1bn in outstanding borrowings split among three credit facilities at the end of November, according to the filing.

“At this time, the company does not have sufficient resources to repay the amounts under the credit facilities and this will lead the company to consider all strategic alternatives, including restructuring its debt under the US bankruptcy code,” the company said.

The retailer had $225.7mn in cash as of November 26, according to its financial statements from January.

“As we consider all paths and strategic alternatives, we continue to work with our advisers and implement actions to manage our business as efficiently as possible,” a company spokesperson told the Financial Times. “We will update all stakeholders on our plans as they develop and finalise.”

Bed Bath warned at the start of January that its business was struggling and it was considering options including bankruptcy and asset sales. It struggled to acquire inventory for the winter holidays, and said customer traffic had slowed, reporting a net loss of $393mn during its fiscal third quarter.

The default notice could complicate the company’s attempts to find a buyer, or sell its assets to recoup cash.

“These covenants could impose significant operating and financial limitations and restrictions on us,” Bed Bath said in the filing, “including restrictions on our ability to enter into particular transactions such as asset sales and acquisitions, and to engage in other actions that we may believe are advisable or necessary for our business.”

Shares of the company, which became a favourite of retail traders during the “meme stock” craze that peaked two years ago, fell as much as 27 per cent on Thursday after the filing was published, but closed 22.2 per cent lower at $2.52.

After several volatile sessions in recent weeks of trading, including hitting a more than three decade low of $1.31 on January 6, Bed Bath shares are now up 0.4 per cent in 2023.

Bed Bath in August announced plans to close 150 underperforming stores and said earlier this month it had begun cutting as much as $100mn in costs and would reduce headcount in an effort to remain in operation.