S&P downgrades Bed Bath & Beyond, says beleaguered retailer has ‘insufficient funds’ to repay its financial obligations
S&P Global Ratings downgraded Bed Bath & Beyond Inc.’s credit Friday, a day after the beleaguered retailer said it was in default on loans that have been called in.
The default filing sent Bed Bath & Beyond’s
stock plunging, although it rallied to end Friday’s session up 1.2%, outpacing the S&P 500 Index’s
S&P Global Ratings lowered its issuer credit rating on Bed Bath & Beyond to ‘D’ from ‘CC’ and its issue-level ratings on senior unsecured notes to ‘D’ from ‘C’.
“We consider BBBY to be in default as it has not repaid the outstanding loans and obligations under its $1.13 billion ABL [asset-based lending] and $375 million FILO [first in, last out] facilities that are currently due,” said S&P Global Ratings, in a statement.
Related: What’s next for Bed Bath & Beyond after defaulting on its loans?
“BBBY has insufficient funds available to repay its financial obligations, including its $1.03 billion senior unsecured notes, and it has disclosed it is considering strategic alternatives, including restructuring its debt through bankruptcy,” S&P Global Ratings added. “We expect the company will experience a general default and pursue a comprehensive debt restructuring.”
MarketWatch has reached out to Bed Bath & Beyond with a request for comment on the S&P downgrade.
Experts say that bankruptcy is looming for Bed Bath & Beyond.
Howard Ehrenberg, a bankruptcy and reorganization practice partner at the law firm Greenspoon Marder, thinks that Bed Bath & Beyond’s bankruptcy filing could be imminent. “My best assumption is that BBBY will file before the bank takes action to seize the assets,” he told MarketWatch via email Thursday. “The loan documents most assuredly give the bank the right to take control of the company and the inventory.”
See also: Bed Bath & Beyond stock plunges more than 20% after filing shows default on loans
The lawyer, who is not involved in Bed Bath & Beyond’s efforts to resolve its financial woes, recently told MarketWatch that the retailer is likely running out of cash.
“Bed Bath & Beyond has edged closer toward bankruptcy after defaulting on its loans as it struggles to find the cash it needs to repay its debts,” City Index markets analyst Joshua Warner told MarketWatch, via email Friday. “Creditors are now demanding immediate repayment and it simply doesn’t have the money as sales continue to decline, losses swell, and it burns through cash.”
“I hate to say it, but it looks like the only real option left is filing for bankruptcy,” Matthew Debbage. CEO for the Americas and Asia at monitoring and risk-management company Creditsafe, told MarketWatch via email Friday.
Related: As specter of bankruptcy looms over Bed Bath & Beyond, what’s next for the troubled retailer?
“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 Bed Bath & Beyond spokesperson said in an email Thursday. “As is our practice, we do not comment on speculation. We will update all stakeholders on our plans as they develop and finalize.”
On Jan. 10, Bed Bath & Beyond announced the closure of almost 130 stores, just days after saying it may need to declare bankruptcy.
The announcement that the sometime meme-stock darling may need to declare bankruptcy sent Bed Bath & Beyond’s stock sinking toward a 30-year low and followed a turbulent few years marked by strategic missteps, cash burn, challenging underlying business trends and the impact of the COVID-19 pandemic.