Rosenberg & Estis, P.C. Bankruptcy Newsletter: Bed Bath & Beyond Joins Growing List of Retailers Filing Bankruptcy

by | Apr 25, 2023 | Industry Updates

Bed Bath & Beyond Joins The Growing List of Retailers Filing Bankruptcy

On Sunday, April 23, 2023, retail giant Bed Bath & Beyond filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey stating its intention to start an orderly wind down of its operations while seeking a buyer for all or some of its businesses. The company filed bankruptcy listing estimated assets and liabilities in the range of $1 billion to $10 billion. While hundreds of “Bed Bath & Beyond” stores and its websites currently remain open to serve customers, the company anticipates closing all its stores by June 30, 2023. This should all come as no surprise. Since on or before January 2023, the company has reportedly been defaulting loans, reducing sales and stock values, asking landlords for concessions, and closing stores (with some landlords already seeking replacement tenants)–all the usual indications of an imminent retail bankruptcy.

Bed Bath & Beyond has joined the growing list of retailers that have filed for bankruptcy so far this year, including party supplies chain Party City and even David’s Bridal which filed Chapter 11 bankruptcy on April 17, 2023 for the second time in five years, laying off over 9,000 employees. This, along with the number of retailers that filed bankruptcy last year, may offer a window of what more is to come for retail and other related industries given the changing dynamics, increasing challenges in the U.S. economy, and the recession anticipated by so many.

For landlords or counterparties to existing leases or contracts with Bed Bath Beyond entities, this may mean that your lease or contract will be rejected in the bankruptcy, or assumed and assigned in connection with asset sales in the bankruptcy, effectively assigning you a new tenant or counterparty for the existing lease or contract. You may also be asked to modify and grant concessions under your existing lease or contract as a condition for it to be assumed and assigned to a new tenant or counterparty. Finally, you may need to file and prosecute a proof of claim to protect your rights to recovery, and you may be entitled to a priority claim for rent, use/occupancy, goods or services provided after the April 23, 2023 bankruptcy filing. Moreover, if your lease is not immediately rejected in Bed Bath Beyond’s bankruptcy, you will need relief from the automatic stay from the Bankruptcy Court before you can recover possession and re-lease your premises to a replacement tenant. Furthermore, landlord to existing leases with Bed Bath Beyond entities may have cash security deposits or letters of credit to secure obligations under the leases which may also require Bankruptcy Court approval to apply or draw. Finally, payments received or applied to outstanding arrears within 90 days before the company’s bankruptcy could be subject to clawback if not properly substantiated or defended.

How to Protect Yourself

R&E frequently represents landlords, lenders and other parties in such major retail bankruptcies, as well as middle market size bankruptcies across various industries, to assess their risks and rights and to formulate strategies for recovery and liquidity concerns, including how best to access and apply security deposits or letters of credit, as well as other businesses concerned about the present and potential future impact of the unique challenges faced in the current economic climate. Accordingly, now would be a good time for you to conduct a review of any contract, loan and/or security agreements with any potentially troubled counterparties. Feel free to contact R&E to assess your risks and rights, to assist with any lease review and to formulate strategies to best serve you.