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Bed Bath & Beyond received a notice of default and a request for immediate repayment of its loans on Wednesday from JPMorgan, the administrative agent for its credit line, according to an SEC filing.

As a result, the company is considering all options, including restructuring its debt under bankruptcy protection.

Why it matters: This is not the normal cadence of events for a distressed retailer preparing for a restructuring either in or out of court, Richard writes.

But the factors that led to Bed Bath & Beyond's struggles are not typical either, said an industry analyst, who requested anonymity because of their company's restrictions.

What they're saying: "As we consider all paths and strategic alternatives, we continue to work with our advisors and implement actions to manage our business as efficiently as possible," Bed Bath & Beyond said in an emailed statement. 

"As is our practice, we do not comment on speculation. We will update all stakeholders on our plans as they develop and finalize," the company added.

The intrigue: Typically by this point, a retailer in this situation would have already filed for Chapter 11 bankruptcy protection, with a debtor-in-possession (DIP) loan in place to fund operations, the source says.

But Bed Bath & Beyond's cash burn may make it difficult to calculate the size of a DIP or to secure a stalking horse bidder in the event of bankruptcy, among other options.

Catch up fast: As Axios' Felix Salmon wrote earlier this month, while Bed Bath & Beyond hadn't yet filed for bankruptcy, the message from the bond market was that the home goods retailer was certain to do so.

Note that it had already been slapped with a "selective" or "limited" default by the credit rating agencies.

The big picture: Excess inventory combined with reduced consumer spending after outsized pandemic-induced spending on home goods have created a perfect storm. 

Bed Bath & Beyond was spending heavily on a digital makeover, refreshing stores, and introducing new private label lines, which take years to develop.

Yes, but: Bed Bath & Beyond is still the largest home goods retailer in the U.S., the source says — so there technically should be a business to salvage.

Plus, the company owns assets that have value, such as Buybuy Baby, that it can monetize, though it's explored a sale of that banner before.

The bottom line: If Bed Bath & Beyond is to survive, it will be a long path back to profitability and it will take a great deal of capital, which now comes at an increasingly higher cost, the source says.

1. Bed Bath & Beyond receives a default notice

Image of BBBY storefront with store closing sale sign

Photo: Johnny Milano/Bloomberg via Getty Images

Twinco, the Madrid-based supply chain finance company focused on the apparel industry, is raising a $100 million debt facility, CEO Sandra Nolasco told Richard Thursday.

Why it matters: Twinco aims to streamline the complicated and fragmented process of financing apparel production from manufacturing to delivery of goods.

Plus: Thursday's Pro Rata, on SAP's sale process for its Qualtrics stake.

2. Twinco raising $100 million loan

Illustration of a conveyor belt in the shape of a dollar sign.

Data: Fitch Ratings; Chart: Axios Visuals

The default rate for retail high-yield bonds rose with Party City's bankruptcy, and Fitch Ratings forecasts it will rise further with Bed Bath & Beyond's likely imminent default, Richard wrote Monday.

Why it matters: After a brief respite, a number of issuers are struggling with large debt loads after making poor strategic decisions.

Plus: Monday's Pro Rata on Elliott's Salesforce stake. 

3. Party City bumps retail high-yield default rate higher

Shopify has positioned itself to become a one-stop-shop for both small, independent merchants and established retailers, as it scouts additional M&A, Kimberly wrote Wednesday.

Why it matters: The acquisitive company has the "cash flow and the financial flexibility" to make more buys to boost its strategy, says D.A. Davidson analyst Gil Luria.

Plus: Wednesday's Pro Rata, on Hipgnosis' acquisition of Justin Bieber's publishing and recording rights.

4. Shopify's one-stop-shop strategy

Photo illustration of Shopify president Harley finkelstein with cursors and a shopping basket overlaid

Photo illustration: Tiffany Herring/Axios; Photo: courtesy Shopify

Private label food sales grew in 2022 and are expected to do so again in 2023, which could lead to a smörgåsbord of M&A for dealmakers, according to a report by investment bank William Blair.

Why it matters: Bankers, strategic acquirers and PE firms, are hungry for transactions, Richard wrote Tuesday.

Plus: Tuesday's Pro Rata, on Eli Musk's testimony and Serta's bankruptcy.

5. Buyers circle private labels

Illustration of a waiter holding a silver serving tray featuring a bag of groceries

Happy Friday, Retail readers. Claire Rychlewski here with this week's digest.

First up, an update on Bed Bath & Beyond from Richard. 

🥣 Situational awareness: Food giant Danone is putting U.S. yogurt brands Wallaby and Horizon Organic under strategic review. 

That's all for this week. Catch you Monday.

Thanks to editor Claire Rychlewski and copy editor Mickey Meece. 

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January 27, 2023

1. Bed Bath & Beyond receives a default notice