Bed Bath & Beyond Weighs Private Loans as Retailer Burns Though Cash

Bed Bath & Beyond Inc. is considering tapping the private credit market to boost liquidity as the struggling retailer burns through its cash.

Company management consulted with direct lenders about a potential new asset-based credit line, according to people with knowledge of the talks who asked not to be named because the talks are private. The company had about $108 million in cash and equivalents at the end of May, down from $1.1 billion a year earlier.

The retailer’s talks with private credit providers are preliminary and it is still weighing other options, the people said.

A representative for the company declined to comment on the potential financing, and said Bed Bath & Beyond would provide an update at the end of the month.

Bed Bath & Beyond is mired in a deep sales slump, and its bonds change hands for less than half of face value amid concerns that the retailer’s turnaround effort has stalled. Its chief executive officer stepped down in June after the company reported a $224 million adjusted loss and a glut of inventory that will need to be marked down.

The retailer, based in Union, New Jersey, hired advisory firm Berkeley Research Group to help it focus on cash, inventory and balance sheet optimization. It also made plans to cut at least $100 million in planned capital expenditures.

Supply chain disruptions and weakening consumer confidence have pressured retailers, many of which are now swamped with goods after rushing to build up inventories. Bed Bath & Beyond’s inventory was up more than 12% compared to a year earlier, while sales fell, according to its its earnings report for its first quarter, which ended May 28.  

The company still has room to draw on its existing $1 billion asset-based loan from JPMorgan Chase & Co,, but anticipates additional needs.

Chief Financial Officer Gustavo Arnal said in a June conference call to discuss earnings that the company was exploring ways “to even increase further our liquidity and navigate through the working capital cycle, particularly in the next two quarters.”

Bed Bath & Beyond’s senior unsecured notes due 2024 trade around 41 cents on the dollar, according to Trace. Moody’s Investors Service slashed the company’s credit grade three notches to Caa2 last month, citing the impact of steep revenue and earnings declines on liquidity, cash flow and debt metrics.