Below is our initial take on recent bankruptcy-related developments:
On Thursday, Bed Bath & Beyond warned the public of a potential bankruptcy, sending the company’s shares into a 25% plummet. The retailer has cited loss in revenue and customers, lack of inventory, and inability to refinance portions of its debt of nearly $1.2 billion in unsecured notes.
S&K Take: A familiar story in retail, as another big box retailer looks primed to succumb to overleverage, too many locations and supply chain woes. It remains to be seen what form this restructuring takes, whether it is out of court or utilizes the protections of chapter 11. Regardless, this is likely the tip of the iceberg in 2023 as credit markets tighten and consumer sentiment weakens with inflation.
A bankruptcy judge ruled on a potentially precedent-setting key legal issue in crypto-related bankruptcies, deciding that crypto assets deposited into the Celsius Network’s interest accounts belong to the firm, not the individuals.
Citing revenue decreases and increased costs, TOMS King Holdings, one of the largest Burger King franchisees, has thrust its subsidiaries operating 90 stores in four states into Chapter 11 bankruptcy.
S&K Take: Bankruptcy professionals have seen a few of these franchisee cases at this point. This case isn’t massive by most standards, with 90 locations and about $35.5 million in funded debt. While clearly different than Bed Bath & Beyond, the company cites a decrease in foot traffic, supply chain issues, inflation, an increase in wages and prohibitive rent payments as the reasons for bankruptcy. Feels like a retailapocalypse redux.