Bed Bath & Beyond files for US bankruptcy protection

Bed Bath & Beyond filed for Chapter 11 bankruptcy protection on Sunday after the home goods retailer failed to secure funds to stay afloat.

The New Jersey-based retailer filed for bankruptcy in a District of New Jersey court, listing assets of $4.4 billion and total debt of $5.2 billion as of late November, according to a court filing.

Bed Bath & Beyond said that it has received a commitment of approximately $240 million in debtor-in-possession financing from Sixth Street Specialty Lending, according to a separate statement.

The company said its 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites will remain open and continue serving customers as it begins efforts to effect the closure of its retail locations.

In February, the embattled retailer had planned to raise around $1 billion through the offering of preferred stock and warrants to avoid bankruptcy.

The company was able to raise $360 million from the complex deal, helping it pay loan defaults and interest payments for senior notes.

But Bed Bath terminated the deal in late March and announced plans to sell $300 million worth of its shares while also once again warning it might have to file for bankruptcy if it could not secure the funds.

The company, which shot to popularity in the 1990s as a go-to shopping destination for couples making wedding lists and planning for new babies, has seen demand drop in recent years as its merchandising strategy to sell more store-branded products flopped.

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Last year's moves to abandon that strategy, and to bring in more national brands that shoppers recognise, had not shown signs of working, with the company reporting a loss of about $393 million after sales plunged by 33 per cent for the quarter through November 26.

In January, the company raised doubts about its ability to continue as a going concern just months after it announced more than $500 million in new financing, as well as job cuts and 150 store closures.

Retailers in distress often look to bankruptcy protection after the holiday season to take advantage of the cash cushion provided by recent sales.

In February, according to a court filing, Bed Bath & Beyond's Canadian operations were going out of business. The Canadian division, which operates 54 Bed Bath & Beyond stores and 11 buybuy BABY stores, was insolvent, the filing posted on the website of consultancy Alvarez & Marsal showed.

Bed Bath said in March it was seeking shareholder approval for a reverse stock split in the range of one-for-five to one-for-10. Earlier this month, its board urged shareholders to approve the split, saying that if the plan failed, bankruptcy would be imminent.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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