Bed Bath & Beyond Canada to shut operations, US business dodges bankruptcy with equity offering

14 Feb 2023 --- Bed Bath & Beyond (BBB) Canada is “winding down” its business, according to a court filing submitted last Friday. The group admits it has been financially struggling with “significant net losses since 2018,” and the Canadian business is noted to experience “dramatic declines in revenue” due to the COVID-19 pandemic and worldwide economic downturn caused by supply chain disruptions and persistent inflation.

In a bid to save its US-based operations, the group completed a public equity offering last week. This included the closure of its offering of shares (Series A convertible preferred stock). Warrants to purchase the shares and and the company’s common stock were also closed.

BBB received initial gross proceeds of approximately US$225 million in the offering and expects to receive an additional US$800 million of gross proceeds in future installments. The profits will be used to repay outstanding borrowings under its credit facility. 

“The group expects that a failure to receive the full amount of proceeds of the Offering would likely force a bankruptcy filing,” outlines the Ontario Superior Court Of Justice in the Factum of the Applicant.

“BBB’s situation significantly worsened throughout 2022, with declining year-over-year sales in both the US and Canada, multiple credit rating downgrades, cash flow constraints and significant inventory reductions.”

Shutting the doors
In a bid to save its US-based operations, the group completed a public equity offering last week.The company plans to close 150 stores across the US to avoid bankruptcy. Meanwhile, its 54 stores and 11 buybuy Baby stores in Canada are closing. BBB Canada employed approximately 387 full-time employees and 1,038 part-time employees in connection with its retail operations on January 31, 2023.

As a result, BBB has been laying off employees as it tried to offset declining sales by cutting costs. The personal care and home amenities giant has been consulting its advisors to stave off the threat of bankruptcy; however, it conceded the option was not off the table.

“Faced with extremely limited funding and significant constraints upon its use of cash, the BBB group has reluctantly concluded that there is not enough capital available (even with the lifeline provided by the offering) to restructure both its business in the US and properly resuscitate the Canadian business to achieve profitability,” shares the Ontario Superior Court Of Justice.

“BBB Canada is not profitable on a standalone basis. BBB Canada has realized significant net losses for the nine months ending November 26, 2022. Moreover, BBB Canada contributes negative EBITDA margin to the BBB Group’s consolidated business.”

Alvarez and Marsal Canada consulting firm has been appointed to monitor BBB’s business and financial affairs.

“Inventory levels at the Canadian stores are at historic lows due to the financial challenges faced by the enterprise, tightened or unavailable trade credit, and/or the unwillingness of suppliers to ship merchandise,” continues the document. “BBB Canada is insolvent [and is] required to wind down its business.” 

Strengthening omnichannelBBB received initial gross proceeds of approximately US$225 million in the offering and expects to receive an additional US$800 million of gross proceeds in future installments.
Kirkland & Ellisare represent BBB in the equity derivatives offering for up to US$1 billion in the new financing and in the amendment to its credit agreement.

“This transformative transaction will provide a runway to execute our turnaround plan. We continue to put our customers at the center of every decision, positioning BBB to meet and exceed their expectations while resetting our foundation for near- and long-term success,” says Sue Gove, president and CEO at BBB. 

“We are optimizing our store fleet and supply chain and continuing to invest in our omni-always capabilities. This will enable us to serve our customers better and grow profitably by directing merchandise where and how they want to shop with us.”

The company says that its supply chain, technology, expense structure and business processes will continue to be streamlined as it realigns its operational foundation.

“We also prioritize the availability of leading national and emerging direct-to-consumer brands. As we make important strategic and operational changes, we will continue to take disciplined steps to enhance our cost base and improve our financial position,” adds Gove.

By Venya Patel