Bed Bath & Beyond (NASDAQ:BBBY) stock crashed 22% on Thursday after the company disclosed in a regulatory filing that it does not have sufficient funds to repay the amounts under its credit facilities and received a default notice from JPMorgan (NYSE:JPM) on January 25, 2023.
BBBY disclosed that the defaults occurred on or around January 13 due to the company’s “failure to prepay an overadvance and satisfy a financial covenant.” Consequently, JPMorgan as the administrative agent of the lenders, decided to exercise certain rights and remedies, making the loan amounts under the credit facilities payable immediately. Effective January 25, all outstanding loans and obligations under the credit facilities carry interest at an additional default rate of 2% per year.
The filing mentioned that as of November 26, 2022, BBBY owed $550 million and $375 million under two different credit facilities. The company stated that due to a lack of funds to repay the due amounts, it is considering all strategic alternatives, including restructuring its debt under the U.S. Bankruptcy Code.
BBBY has been taking various initiatives to revive its sales and improve its financial position. The company has been cutting down its costs and reducing its store footprint. However, intense competition and macro pressures are making it difficult for the company to turn around its business. Earlier this month, BBBY disclosed that it was exploring several financial options, including a potential bankruptcy.
Is BBBY a Buy, Sell, or Hold?
Wall Street has a Strong Sell rating on Bed Bath & Beyond based on six unanimous Sell ratings. The average BBBY stock price target of $1.36 implies a possible downside of 46%. Despite the revival of the meme stock frenzy earlier this month, BBBY stock has plunged 82% over the past year.