Bed Bath & Beyond (BBBY) is racing to stay in business while hedging bankruptcy bets.
A dual-track strategy emerged on Sunday as the home goods retailer filed for protection of its assets under Chapter 11 of the US Bankruptcy Code.
A Chapter 11 bankruptcy filing typically helps a financially distressed company work with its creditors to develop a plan to restructure its debt and emerge as a viable entity. However, Bed Bath & Beyond has announced that it will focus on liquidating assets.
The bankrupt household goods chain said a dual-track strategy was the best way to maximize stakeholder value. We plan to implement a limited marketing process to attract interest for all assets.
“If the sale is successful, the company will move away from the store closures required to complete the transaction,” the company said.
Other troubled companies have followed a similar path. David’s Bridal, who applied for Chapter 11 protection on April 17, also opted for his two processes of sale and liquidation. And retailer Toys “R” Us has similarly opted for the 2017 Chapter 11 filing option.
Elie Worenklein, restructuring attorney at Debevoise & Plimpton, said the dual-track, or “toggle” strategy puts Bed Bath & Beyond in a more attractive position for potential bidders.
The store can continue to generate revenue from customers and the company continues its marketing efforts to sell all or part of its business. Chapter 11 does not require companies to close their doors.
In addition, Worenklein said Chapter 11 allows the company’s management to remain in place, which is also important for maximizing value for the benefit of creditors. increase.
“They are the most familiar with the business and the relevant stakeholders to run the sales process,” he said. We will be bringing in experts from
The Chapter 11 process also lends itself well to distressed asset marketing, as it tends to attract more media attention and allows a clearer definition of assets and liabilities.
Some bidders want to buy assets out of bankruptcy because they can obtain a court order that spells out exactly the liabilities and responsibilities that come with the purchase. Bankruptcy law also allows bidders to purchase assets without a lien or claim, providing protections not available outside of bankruptcy.
“A court-supervised sales process adds value to a court order and is often more attractive to interested bidders,” Worenklein said. “There is great value in that court order,” Warrencrien said.
Bed Bath & Beyond has announced that it will be closing on April 26th.
Retailer sales last peaked at $12.3 billion in 2017, with the most recent 2021 total sales at $7.9 billion. In the most recent quarter, sales were down 33% for him, and his adjusted loss was $225 million.
Alexis Keenan is a legal correspondent for Yahoo Finance. Follow Alexis on Twitter @alexskweed.
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