Could Bed Bath & Beyond Declare Bankruptcy? These 2 Recent Developments Suggest Yes

Zinger Key Points
  • Bed Bath & Beyond hired a law firm that specializes in bankruptcies and restructurings.
  • The retailer said it would provide an update at the end of the month as it works to improve its balance sheet.

Retailer Bed Bath & Beyond BBBY has been one of the bigger stock storylines of 2022. The popular stock that has been labeled among the “meme stocks” saw strong interest after GameStop Corporation GME Chairman Ryan Cohen accumulated a stake in the company.

The retailer faces several issues including high debt. Here’s what could be next for the company.

What Happened: Cohen exited his position in Bed Bath & Beyond recently, netting a profit of over $60 million in the process. Several other traders made profits trading the retailer, including Jake Freeman, who made $100 million.

Other investors haven’t fared as well, and more pain could be ahead.

Bed Bath & Beyond hired Kirkland & Ellis to help tackle its debt load and a potential restructuring, according to Bloomberg. The law firm is known for being hired in several bankruptcy moves.

“Our market-leading Restructuring Group provides a broad range of business advisory and crisis management skills to navigate clients through the turmoil of situations involving financially troubled companies,” Kirkland & Ellis says on its website.

The company said it helps in restructuring efforts “both in and out of Chapter 11,” in reference to companies going bankrupt or last ditch efforts to avoid it.

The hiring of Kirkland & Ellis comes as new reports from Bloomberg said several suppliers to Bed Bath & Beyond are restricting or halting shipments due to not being paid. The article cites a survey of vendors done by Pulse Ratings that shows the retailer being behind with multiple vendors, with some as late as 90 days.

Related Link: If You Invested $1,000 In Bed Bath & Beyond Stock When Ryan Cohen Did, Here's How Much You'd Have Now 

Why It’s Important: While hiring Kirkland & Ellis doesn’t mean a bankruptcy for Bed Bath & Beyond will occur, it could mean it's on the table as an option.

Bed Bath & Beyond has high debt and the hiring of the law firm is seen as a way to help raise new money, refinance existing debt and explore other options.

Kirkland & Ellis has a long list of past help with companies in bankruptcy. This includes working with toy retailer Toys R Us to restructure its debts after declaring bankruptcy.

More recently, Kirkland & Ellis was hired by several cryptocurrency-related companies in the midst of the bear market and several bankruptcies, according to Blockworks. The law firm was hired by Celsius and Voyager Digital, both of which declared Chapter 11 bankruptcy.

Babel Finance hired the law firm to help it restructure its debt.

Blockworks said lawyers told the media outlet that Kirkland being hired by all three companies makes sense given its strong reputation and ability to get restructurings done quickly. In the case of the crypto companies, a longer process could be preferred with the potential of a rebound to the market and the ability of Kirkland & Ellis to stretch out proceedings like it did with Toys R Us.

Bed Bath & Beyond issued a statement after the Cohen sale saying it was pleased to reach a previous deal with him and reiterating the company’s continued focus on maximizing value for all shareholders. The company said an update will be coming soon.

“We are continuing to execute our priorities to enhance liquidity, make strategic changes and improve operations to win back customers, and drive cost efficiencies,” the retailer said.

The company said it would provide an update at the end of the month as it works with “external financial advisors and lenders” to improve its balance sheet.

BBBY Price Action: Bed Bath & Beyond shares were down 13.78% to $9.51 on Monday. Shares have fallen over 60% in the last five days and are down 37% year-to-date in 2022.

Photo via Shutterstock. 

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Posted In: NewsSmall CapMoversMediaTrading IdeasbankruptcyCelsiusChapter 11Chapter 11 BankruptcyKirkland & EllisRetail StocksRyan CohenToys R USVoyager
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