Welcome to the 147th Pari Passu newsletter.

A few months ago, we looked at how budget stores like Tuesday Morning were unable to sustain their business amid online competition. Like Tuesday Morning, Bed Bath & Beyond Inc. also operated a treasure hunt model, in-store home goods sales strategy.

Today, we’ll look at how Bed Bath & Beyond lost relevancy in a rapidly changing retail environment. We’ll also see how aggressive attempts to return value to shareholders further weakened the company’s financial position, ultimately creating liquidity crises that brought an end to the company’s 50-year run as a staple in American home retail.

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While everyone's fixated on AI infrastructure buildouts, the real story is unfolding in distressed credit markets.

AI disruption is creating new categories of distress — and reshaping how we approach workouts, valuations, and recoveries. From AI-dependent businesses facing obsolescence to traditional companies whose AI implementations are failing, restructuring professionals are navigating uncharted territory.

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• Which leveraged sectors face AI displacement (early warning signs included)

• How AI risk language in credit docs affects workouts

• Valuing AI-generated revenue in restructuring scenarios

• Real case studies of AI-driven distress

Company Overview

Bed Bath & Beyond Inc. (“BBBY”) was one of America’s first superstores and one of North America’s leading home goods retailers. The company operated a network of in-person stores and an e-commerce platform that focused on home and lifestyle products like bedding, kitchenware, appliances, and home decor. As of early 2023, BBBY operated around 360 retail locations across the United States and maintained an active digital presence through its BedBathandBeyond.com website [1]. At its peak sales from FY 2015 – FY 2018, the company was generating over $12bn in annual revenue [3]. 

Corporate History

Bed Bath & Beyond was founded in 1971 by Leonard Feinstein and Warren Eisenberg, two retail executives who had worked together at Arlans, a struggling discount chain. Sensing a broader shift away from general department stores toward specialized retail, they launched Bed ‘n Bath with the vision of creating a dedicated store for linens and bath products, which were categories traditionally relegated to cramped corners of larger stores. The first location opened in Springfield, New Jersey, with an initial investment of $50,000 each. A second store in Cedarhurst, New York soon followed. Their early success was driven by a simple yet powerful formula: offer branded merchandise at discount prices in a clean, well-organized environment with attentive customer service [1]. 

Throughout the 1970s and 1980s, Bed ‘n Bath saw steady growth as the company capitalized on the rise of suburban malls and subsequent rise in demand for suburban retail. The company’s early stores operated in modest 2,500 square foot spaces and sold traditional bed and bath products such as linens and bath accessories. By 1985, Bed ‘n Bath had opened its first 20,000-square-foot “superstore,” marking a pivotal moment in the company’s evolution. The larger format allowed for a vastly expanded product assortment and competitive pricing, paving the way for the company to pioneer a “category killer” strategy, which involved dominating a single retail segment with broader offerings and more affordable prices than competitors [1]. 

In 1987, the company changed its name to Bed Bath & Beyond to reflect its expanding product portfolio, which now included kitchen electrics, housewares, and home décor. Over the next decade, the company accelerated its expansion across the United States, tapping into a growing middle class and widespread demand for accessible, stylish home goods. The company went public in 1992 under the ticker BBBY on NASDAQ. Revenue milestones quickly followed the company’s IPO; by 1999, BBBY had achieved over $1bn in annual sales, capping off eight straight years of record earnings [1].

The early 2000s saw continued revenue expansion and strategic acquisitions, with revenues crossing $2bn in 2001. BBBY acquired buybuy BABY in 2007, which would become a major pillar of the business as it allowed the company to capture cross-selling opportunities within young families. At its peak, the company operated more than 970 stores across all 50 U.S. states and had a footprint in Canada, Mexico, and Puerto Rico. BBBY became famous for its never-expiring 20%-off coupons and treasure hunt store model, which the company leveraged in place of costly advertising to drive in-store traffic. The company coined the philosophy “pile it high, let it fly” in-store experience, which included massive quantities of products on the floor and quick inventory turnover. The company also invested in proprietary inventory systems to manage its extensive SKU count (number of unique products offered by a company) efficiently, a move that allowed it to maintain competitive pricing while offering broad assortments of products [1].

By the mid 2010s, the company had reached its peak revenues, exceeding $12bn per year from FY 2014 – FY 2018 [3]. While this period coincided with a broader e-commerce boom that took the US starting in the mid 2000s, BBBY was hesitant to adopt the e-commerce strategy pioneered by competitors like Target and Amazon due to their successful in-store strategies; the company continued to rely heavily on its in-store traffic to drive sales [1]. 

Business Model and Pre-Distress Financial Profile 

Bed Bath & Beyond Inc. positioned itself as more than just a home goods store; the company aimed to be the go-to destination for all customers’ major life events: moving into a new house, getting married, preparing for a new baby. BBBY supported these transitions through offering a wide assortment of products along with curated product bundles designed specifically to meet the needs of each life event, such as wedding registries and student life programs [2]. 

To deliver on this value proposition, the company executed an omnichannel fulfillment strategy: roughly 70% of online orders were packed and shipped from centralized distribution centers owned and operated by the company, while the remaining 30% were fulfilled by individual retail locations, which shipped them directly to the customer. In addition to its flagship brand, BBBY owned and operated buybuy BABY, a specialty retailer focused on baby gear and nursery furnishings with a loyal following among young families [1]. 

BBBY had two main operating segments: North American Retail (comprised of Bed Bath & Beyond, buybuy BABY, Cost Plus World Market, Harmon, and Christmas Tree Shops stores) and Institutional Sales (comprised solely of Linen Holdings, a supplier to hospitality clients). The company did not break out revenue by segments in its financials and instead reported a consolidated revenue because Institutional Sales did not meet the quantitative GAAP thresholds to be a reportable segment separate from the company’s North American Retail segment. Digital sales also did not comprise a large portion of total revenue, accounting for less than 2% of revenue in FY 2015 [6]. 

We will quickly note here that the company’s fiscal year ends in the next year’s late February / early March. From FY 2010 to FY 2014, BBBY consistently reported stable profitability. In this period, the company’s revenue steadily grew from $9.5bn to $12bn, and gross profit rose from $3.6bn to $4.6bn, reflecting gross margins of around 40%. Operating income hovered around $1.5bn, and net income was around $960mm [4]. BBBY saw its stock price hit an all-time high of $80 per share in January 2014 [2]; market cap during this time also peaked at around $16.3bn in January 2014 [3].

Pre-COVID Warning Signs 

Following this period of financial stability, BBBY started experiencing some early signs of financial strain that would later escalate to serious warning indicators by FY 2019. Strategic failures further compounded these challenges, ultimately pushing the company into financial distress by 2022. 

In the period from FY 2014 to FY 2017, revenue stayed relatively consistent at around $12bn. However, several events caused profitability to steadily deteriorate. Steeper discounts, promotions to drive in-store sales, and a rise in coupon redemptions all led to lower gross profit as revenue stayed constant. At the same time, consumer demand for online shopping was growing; the increase of online sales led to heightened direct-to-customer shipping costs (which BBBY categorizes under Cost of Sales). Increases in both of these categories, combined with previously mentioned promotions and higher coupon redemptions, caused gross margins to fall steadily from around 40% to around 30% between FY 2014 and FY 2019 while revenue remained largely unchanged[7] [9]. 

In an attempt to keep up with competitors such as Walmart who had invested heavily in and earlier in digital sales channels, the company’s SG&A expenses as a percentage of revenue also increased from 26% in FY 2014 to 33% in FY 2019 driven in part by greater spending on digital advertising and investments in technologies to expand the company’s online presence. BBBY leased nearly all of its 1,500 physical stores, so fixed lease obligations (around 20% of annual $3.7bn SG&A expenses in this period, translating to around $500,000 per store) also kept SG&A high while profitability declined. This rise more than halved operating margins from 13% in FY 2014 to 6% in FY 2017, and net income decreased by over $500mm from $960mm to $420mm in that same period [4] [9].

By early 2019, activist investors, including Legion Partners, Macellum Advisors, and Ancora Advisors, launched a proxy fight against the board and management of BBBY. A proxy fight is when shareholders attempt to gain control or influence over a company by persuading other shareholders to vote for their proposed board candidates instead of the current management’s. In this case, the company’s activist investors criticized CEO Steven Temares for destroying over $8bn in shareholder value during his 15-year tenure. They claimed that, under his leadership, BBBY had failed to adapt to changing consumer preferences for omnichannel shopping, adhered to outdated strategies, and over-compensated executives, all of which resulted in the company’s stock decreasing by 60% between FY 2004 – FY 2018 from around $33 per share to around $12 per share; this represented a fall in market cap of around $8bn to $1.9bn in FY 2018 [3] [10]. In response, the company appointed Mark Tritton, a seasoned retail executive with over thirty years of experience in the industry and former executive of Target Corporation, as the new CEO in October 2019 [11]. Under Tritton, the company outlined a new strategic direction aiming to increase its portfolio of private-label products (moving beyond exclusively selling third-party brands) and focused on becoming an adaptive digital omnichannel retailer [2]. 

Despite these leadership and strategic changes, the company had entered a period of sustained unprofitability by FY 2019. Prior to FY 2018, BBBY had achieved nearly thirty consecutive years of consistent revenue growth (with growth flattening from FY 2014 onward) and positive net income since the company’s IPO in 1992 [2]. However, revenue declined for the first time in FY 2018, falling from $12.3bn in FY 2017 to $12bn. Profitability collapsed soon after: operating income and net income flipped negative between FY 2018 and FY 2019. Operating losses increased from negative $87mm to negative $700mm, and net losses increased from negative $140mm to negative $615mm [9]. At this point, market cap had also plummeted to around $1.3bn [3]. 

While negative profitability showed some warning signs about the company’s future, BBBY’s cash profile was still stable, with $1.4bn in cash covering around $1.5bn of total debt in FY 2019; the company had no reservations about its ability to “finance its operations, including its growth and acquisitions, substantially through internally generated funds.”  At this point, the company’s capital structure consisted primarily of an ABL facility (revolver) with a total capacity of $250mm that had barely been drawn but would be relevant shortly, and around $1.5bn Senior Unsecured notes with roughly $300mm due August 2024 [9].

Post-COVID Financial Collapse 

After a shaky period preceding the pandemic, a series of events from 2020 – 2022 left the company in financial turmoil. Below is a timeline of how each event contributed to that year’s financial troubles: 

Initial Recovery from the COVID Pandemic (March 2020)

Following the COVID pandemic onset in March 2020, the company temporarily closed all of its U.S. and Canadian stores. As a result of the halt in in-person traffic, revenue dropped by 50% from $3.1bn in Q1 2020 to $1.3bn in Q2 2020 [3], and quarterly cash burn surged to $440mm [12]. However, the company recovered from the pandemic relatively well by quickly pursuing a few initiatives. First, BBBY drew down the remaining $236mm from its $250mm revolver in anticipation of needing a liquidity buffer to cover losses following in-store closures [9]. Second, BBBY sold non-core assets. Most notably was the company’s sale of PersonalizationMall.com for $245mm in cash [12], the proceeds of which BBBY used to repurchase $300mm of company bonds at a discount and repay the revolver. In total, the sale proceeds were used to reduce total debt by around $500mm face value. 

Combined with other divestitures and inventory liquidation, the company generated over $750mm cash in Q2 2020 [13]. With continued operational changes to pursue saving initiatives, FY 2020 free cash flow was $85mm; the positive free cash flow was partly driven by reductions in inventory implemented as part of the company’s cost-saving measures and an increase in accounts payable, helping offset pandemic-driven losses [24]. 

As part of a turnaround strategy to improve long-term cash flow following the pandemic, management also launched an executive team overhaul, cut 2,800 jobs out of around 55,000 total positions (amounting to around a 5% reduction in workforce) in August 2020 and closed 200 underperforming stores (out of around 1,500) [14], and planned a series of private-label brand launches to begin in early 2021 to replace current national brands offered on store shelves [15].

Aggressive Share Buyback Program (October 2020)

The company’s swift recovery from initial losses in the first half of 2020 may have left management overly optimistic about BBBY’s future: the company ended Q3 2020 in a healthy position with $1.5bn cash covering around $1.2bn debt, with only $300mm due August 2024 [3] [28]. In October 2020, BBBY announced an aggressive share repurchase program. Share buyback programs aim to reduce the number of outstanding shares, which can boost EPS and signal confidence to the market; the company likely pursued this initiative to prove to shareholders that BBBY was resilient against macroeconomic pressures, especially following investors’ qualms with the company’s profitability in 2019. Initially, this program spanned three years and authorized $675mm in buybacks, including a $225mm accelerated share repurchase. The company quickly raised its repurchase target to $825mm in December 2020 and further increased it to $1bn by April 2021. Management also accelerated the timeline for the program, aiming to complete the full $1bn in repurchases by the end of FY2021 [1].

The share buyback program, which was completed at the end of 2021, caused a dramatic decrease in cash that we will detail in the next section. While the program succeeded in returning value to shareholders, this sudden drop in cash caused widespread doubts among the company’s vendors, who scaled back shipments in fear that BBBY would not be able to meet payment obligations [19].

Private-Label Shift and Supply Chain Challenges (FY 2021)

Recall that BBBY announced a shift to private-label brands as part of the 2020 turnaround strategy. This plan was inspired by CEO Tritton’s time at Nordstrom Product Group, where he spent nearly a decade managing over fifty private-label brands. Tritton thought this successful strategy could apply to improving BBBY as well, and he company executed this shift in early 2021, launching 10 private labels across core product categories [20]. 

To effectuate the company’s goal of increasing the percentage of private-label sales from 10% to 30% [15], BBBY reduced shelf space for national brands and scaled back on its famous 20% off coupons [1]. The latter directly decreased in-store traffic while also requiring the company to spend heavily on building up inventory (mostly from overseas suppliers, which took a long time to arrive), redesigning store layouts, and launching new marketing campaigns. However, the private-label strategy failed dramatically as customers were confused by the unfamiliar, new layout and found the private brands unappealing [1].

Concurrently, BBBY faced severe supply chain disruptions in the second half of 2021, which further undermined its turnaround efforts. Global port congestion, high freight costs, and extended lead times from overseas suppliers significantly delayed inventory replenishment, particularly for the company’s newly launched private-label products [1]. These issues were compounded by the company’s overreliance on imported goods and an inadequate new distribution network, which struggled to manage upstream delays caused by backups at the Port of Los Angeles. As a result, stores were severely understocked during the critical 2021 holiday season, leading to widespread product shortages and empty shelves. These out-of-stocks led to around $100mm in lost sales for Q3 2021 and $175mm in Q4 2021 [2]. In many cases, loyal shoppers who came in seeking familiar national brands likely found those items replaced by private-label alternatives that were also unavailable due to transit delays.

To analyze the cash flows from FY 2021 events, let’s do a quick recap: revenue decreased by $1.5bn in FY 2021. BBBY began with $1.4bn in cash and ended with around $440mm. Only around $10mm was used to repay debt during this period, but there are a few other notable sources for this large change in cash: there was a cash inflow of $20mm from operations and cash outflow of $350mm from capex (making free cash flow negative $330mm), and cash outflow of nearly $600mm from the share buyback program [21]. 

Prepetition Turnaround Efforts 

Bed Bath & Beyond Inc. was never able to recover from its failed initiatives and operational challenges in 2021. In the two quarters following Q4 2021, the company had an average quarterly cash burn of $650mm driven primarily by operational losses [22] [23]. By Q2 2022, the company only had $110mm cash on hand and over $1.4bn in total debt, with $220mm due August 2024 [23]. 

At this point, we would typically assume a normalized EBITDA margin and calculate normalized leverage ratio given that EBITDA had been negative since 2021. However, with a staggering negative $3bn adjusted EBITDA for FY 2022, even this analysis becomes meaningless. The company barely had enough cash to cover an interest expense of $110mm for FY 2022 [8], forcing BBBY to act quickly to avoid insolvency.

New Leadership and (Failed) Emergency Financing (August 2022)  

After Tritton’s private-label initiative worsened the company’s financial profile, BBBY replaced him with Sue Gove. Gove formulated another turnaround plan, aiming to revert back to national brands, close 150 stores and exit the Canadian market (leaving 360 core Bed Bath & Beyond stores and 120 buybuy BABY stores), cut 20% of the company’s corporate and supply chain workforce, and reduce private-label brands by one third [2]. 

Beginning in August 2022, Gove also attempted to execute a few initiatives to boost liquidity: 

In August 2022, BBBY secured over $500mm in new financing. This included an expansion of its ABL Facility to $1.1bn (the original ABL was replaced by a new, 3-year $850mm issued by JPMorgan Chase in June 2020) and a new $375mm FILO Term Loan Facility [1] [29]. The FILO Facility was a key component of the company’s liquidity strategy, aimed at rebuilding vendor relationships and supporting its renewed focus on national brands. This infusion of capital was intended to stabilize operations and re-engage suppliers after significant strain caused by the company’s failed turnaround efforts [1].

In a separate August 2022 transaction, BBBY entered into an at-the-market (ATM) equity offering agreement with Jefferies LLC, allowing the company to sell up to 12mm shares of common stock. The company raised around $115mm through this program, using the proceeds to rebalance its merchandise assortment and manage inventory levels [2].

In October 2022, the company launched a series of debt exchange offers to address upcoming maturities and reduce its long-term unsecured debt obligations. Holders of the 2024 Notes were given the option to exchange for new second lien non-convertible or convertible notes, while holders of the 2034 and 2044 Notes could exchange for new third lien convertible notes. Despite multiple deadline extensions, the company failed to meet the necessary conditions for the transaction, and the exchange offers were formally terminated in January 2023. No debt exchanges occurred, and all tendered notes were returned to their holders without consideration [1].

Following these transactions, the company’s capital structure looked like this: 

RC Ventures Divestiture (March – August 2022) 

Around the same time the leadership transition happened, BBBY became the target of a stock squeeze fueled by the “meme stock” movement. This trend was a wave of speculative trading driven by retail investors on social media platforms like Reddit that drove up the company’s stock price by targeting heavily shorted shares, forcing short sellers to cover their positions and amplifying the price surge. While this phenomenon started in late 2021, BBBY was added to the mix in March 2022 after activist investor Ryan Cohen (founder of RC Ventures LLC and GameStop Chairman) disclosed a 10% stake in BBBY. Knowing the company’s downward financial trajectory, RC Ventures urged BBBY to sell its buybuyBABY banner and explore the sale of the entire company; BBBY appointed three RC Ventures representatives to its Board in response [2]. Before RC Ventures first disclosed its stake in March 2022, the company’s stock price hovered around $15 per share with a market cap of around $1.3bn [3]. 

The announcement of RC Venture’s investment in BBBY ignited a retail investor frenzy, driving up BBBY’s stock prices as traders speculated on a potential turnaround; prices nearly doubled from around $15 per share before the firm’s March 2022 disclosure to around $30 after [3]. Five months later, in August 2022, RC Ventures sold its entire 9.5mm share position (around 12% of BBBY’s total outstanding shares) after taking advantage of the stock price’s increase. This triggered a rapid sell-off; the company’s stock price fell 20% immediately after Cohen announced his intention to divest and plummeted an additional 35% in after-hours trading once securities filings confirmed the divestiture [2]. By the end of August 2022, shares were trading at just above $10 per share, and market cap had fallen to $800mm [3].

Default on Credit Agreement (January 2023) 

The stock price volatility and failed emergency financing initiatives exacerbated the company’s already deteriorating financial position.  By the 2022 holiday season, BBBY lacked the financial flexibility to restock depleted inventory levels, leaving its stores nearly 35% out-of-stock during the critical sales period [1]. A dramatic decrease in year-over-year sales from nearly $2bn in Q4 2021 to $1.3bn in Q4 2022 triggered multiple defaults under the company’s Credit Agreement, which governed both the ABL and FILO facililities [1] [3]; FY 2022 free cash flow was negative $1.3bn [8].

In December 2022, JPMorgan, acting as the prepetition ABL agent, issued two Reserve Notices that lowered the company’s borrowing base under the ABL. Reserve Notices are lender-issued demands that reduce a borrower’s available credit under a loan facility by increasing reserve requirements. These notices also required weekly borrowing base certifications, which are reports that calculate the amount of collateral available to support borrowings. By January 2023, the company had borrowed beyond its permitted borrowing base and failed to deliver required financial documentation, resulting in additional breaches of the company’s fixed charge coverage ratio (a measurement of how well a company can cover its fixed costs using operating income) and a nearly $200mm overadvance (borrowing more than its borrowing base allows) under its ABL Facility [1]. 

In January 2023, JPMorgan notified the company that, due to ongoing defaults, a Cash Dominion Period had commenced, which gave lenders direct control over the company’s cash receipts. This meant that lenders could take direct control of the company’s incoming cash and use it to repay outstanding debt before BBBY could access that cash for operations. Two days later, JPMorgan issued an Acceleration Notice, demanding immediate repayment of the prepetition credit facilities. This included a FILO premium and all accrued fees and interest. The notice also required the company to cash collateralize its letters of credit and imposed a 2% increase on interest rates under the Prepetition Credit Agreement [1]. 

Equity Raise (February 2023)

In an attempt to boost liquidity following the past year’s unsuccessful emergency financing and Credit Agreement default, BBBY raised new capital through a highly dilutive public equity offering in February 2023 [2]; the company’s cash balance at the time was just $130mm [3]. The equity raise included the sale of Series A convertible preferred stock and warrants that initially provided $225mm in gross proceeds, with the potential to raise an additional $800mm through the forced exercise of warrants. How this works is that the company issued warrants alongside the preferred stock, giving holders the right to purchase additional shares at a set price. If the company’s stock price stayed above a specified minimum threshold, these warrants would be automatically exercised, forcing investors to buy more shares and providing the company with additional cash proceeds. By late March, the company had raised a total of $360mm through the offering [2]. 

At the same time as the equity raise, the company entered into an amendment of its credit agreement in which prepetition secured lenders agreed to forbear from exercising remedies related to the company’s default in January 2023, waive the consequences of the Acceleration Notice, extend the Cash Dominion Period, cut the revolver commitment in half to $565mm, upsize the FILO loan by $100mm to $475mm, and provide for an additional $100mm of FILO loans [25]. In return, the lenders required that BBBY use all of its initial proceeds from the offering to pay down outstanding revolver loans under the ABL, including the $200mm overadvance [2]. 

Because the proceeds of the equity raise were used to repay debt, and comparable sales were down 60% from 2022, whatever was left from the offering was used to cover regular operating expenses rather than address the company’s inventory shortages or longer-term viability [2]. 

Recall from above that the company had the potential to gain additional capital from the exercise of warrants. In order to do this, BBBY needed the stock price to remain above a minimum threshold to trigger the automatic exercise. However, the company’s stocks continued to decline due to dilution and poor financial performance, and it became clear that no additional capital would be provided from the offering [2]. 

B Riley ATM Offering (March 2023) 

As a final attempt to recover its financial position, BBBY entered into an at-the-market (ATM) equity offering with B. Riley Securities (a middle-market investment bank) in March 2023. The transaction would allow BBBY to sell up to $300mm of common stock directly to the market. The company also established a separate agreement with B. Riley Principal Capital under a Committed Equity Facility, which would allow additional sales of common stock. Similar to the proceeds from the February equity raise, these proceeds were used to pay down ABL revolver debt and cash collateralize outstanding letters of credit instead of supporting the business itself. 

In April 2023, before the company filed for bankruptcy, BBBY also attempted to secure merchandise through a consignment program with ReStore Capital. ReStore Capital is a trade financing firm that provides liquidity solutions to help retailers purchase inventory from suppliers by paying suppliers upfront and allowing retailers to repay over time as goods are sold. This agreement would have allowed BBBY to buy up to $120mm of inventory on a revolving basis from key suppliers, meaning that the company could replenish its inventory without needing to make immediate upfront payments. However, the program was never implemented due to further restrictions imposed by the company’s lenders, eliminating a critical opportunity to improve inventory availability. 

Chapter 11 Filing 

Prior to officially filing for Chapter 11 in April 2023, Lazard was engaged to explore a possible going-concern sale. The process began with outreach to around twenty financial and strategic investors, nine of whom had signed nondisclosure agreements by January 2023.  As the search accelerated in mid January, the pool of prospective investors grew to around sixty, including private equity firms, strategic buyers, and major financial institutions. Despite these expanded efforts, the company ultimately failed to secure a plan sponsor or the necessary third-party financing to pursue a going-concern restructuring, leading BBBY to look for DIP financing alternatives [1]. The failed going concern sale process, combined with the company’s limited $130mm cash on hand around the time of filing and failed equity raise, underscored the absence of a viable path to profitability. With no third-party sponsors willing to provide support either, BBBY ultimately had no choice but to pursue a liquidation.

Wind-Down 

After its failed going concern sale, BBBY filed for Chapter 11 bankruptcy in April 2023 with the intention of executing a structured Chapter 11 liquidation plan. The difference between a Chapter 11 and Chapter 7 liquidation is that a Chapter 11 liquidation is a court-supervised wind-down managed by the company’s existing management under bankruptcy protection, while a Chapter 7 liquidation involves a court-appointed trustee immediately taking control to sell assets and distribute proceeds to creditors. Under the company’s plan, BBBY would wind down its operations and sell off its assets through court-supervised auctions, rather than attempt to reorganize and continue as a going concern. 

First, BBBY secured $240mm in DIP financing from Sixth Street Partners and other prepetition ABL lenders in April 2023 to support its wind-down process. The DIP included a new SOFR + 7.75% $40mm term loan and a $200mm roll-up of prepetition FILO claims. In return, the DIP lenders received a $400,000 origination fee in cash (1% of the total DIP loan commitment), enhanced old FILO claims, and reimbursement of professional and legal fees without needing approval from the bankruptcy court [2] [20]. The DIP also included a $16mm reserve fund specifically to cover costs related to WARN Act (a U.S. labor law that requires employers to provide at least 60 days’ advance written notice to employees before large-scale layoffs) obligations for employee termination notices and related payments [19]. 

Second, the company closed and planned to wind down all of its remaining 475 physical stores in June 2023, with total proceeds from store closings totaling around $720mm [1]. 

Finally, BBBY pursued a few in-court sale procedures for its assets from June – July 2023. In late June 2023, the company held an auction for its Wamsutta brand (bedding line) and the Beyond.com domain name. Overstock.com, another home improvement platform, was designated as the stalking horse bidder and ultimately selected as the successful bidder for both assets, purchasing Wamsutta and Beyond.com for $21.5mm on June 28, 2023 [18]. Also in late June, BBBY conducted a separate auction for the intellectual property assets related to its buybuy BABY brand. Dream on Me (a U.S. manufacturer and retailer of baby products) was selected as the initial winning bidder, and an asset purchase agreement was executed between the parties. The bankruptcy court approved the sale of the BABY IP assets to Dream on Me for around $15.5 million on July 11, 2023. In early July, the company initiated an asset purchase agreement with Harmon Retail Holdings, LLC for the sale of intellectual property and related assets connected to the Harmon and Face Values brands. The purchase price was $200,000 in cash, and the transaction was approved on July 26, 2023 [2]. 

The Future of Bed Bath & Beyond Inc.

After liquidating, the company is still operating on its website, bedbathandbeyond.com. However, in-store shopping isn’t over for BBBY yet. Since liquidating, it seems that the company is making a comeback: Beyond Inc. (formerly Overstock.com, the buyer of BBBY’s Beyond.com domain name) has invested $40mm in The Container Store in October 2024. The Container Store was formerly a competitor to BBBY, and this investment would allow Bed Bath & Beyond-branded homeware products to be sold at over 100 The Container Store locations [27]. Additionally, the company’s most recent update in May 2025 showed that BBBY would acquire Kirkland’s (a US-based home decor and furnishings retailer) IP for $5mm and expand its credit facility with Kirkland by over $5mm [25]. With this new partnership with Kirkland’s, BBBY is set to open five new brick-and-mortar stores later in 2025, granting Kirkland’s exclusive rights to operate and license the company’s brands [26]. BBBY will also appoint directors to Kirkland’s board, while Kirkland’s will operate its stores for both companies [25]. 

Bed Bath & Beyond’s future seems optimistic, but there are still a few lessons to be learned from its bankruptcy. The downfall of BBBY illustrates how corporate strategy and financial management are key to a company’s success. First, we saw how aggressive shareholder return programs like share buybacks can dangerously weaken a company’s balance sheet if not supported by sustainable profitability and cash flow. Second, strategic pivots, such as BBBY’s shift to private-label brands, should not be executed unless management truly understands customer behavior; the elimination of the company’s famous coupons and a complete brand turnaround directly infringed on two of BBBY’s core value propositions, turning loyal customers away. Finally, the case highlights the critical importance of maintaining vendor and lender confidence; once that confidence is lost, even the most aggressive financing and turnaround efforts are often unsuccessful.

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