Bankruptcy Deep Dive
BBBY Chapter 11 Liquidating Plan — Class Structure, Distribution Waterfall, Professional Fees, and Codebtor Analysis
In re: Bed Bath & Beyond Inc. — D.N.J. No. 23-13359
At a Glance
Liquidating Plan — Not Reorganization
BBBY's plan was a liquidating plan. All assets were monetized and the debtor entities ceased to exist as operating companies. The entity was renamed to 20230930-DK-Butterfly-1, Inc. on the effective date (September 29, 2023). Common shareholders received nothing — Class 9 equity was cancelled, released, and extinguished. Shareholders were not even permitted to vote on the plan; they were "deemed to reject."
Full Class Structure
The plan organized claims into 10 classes plus unclassified administrative and priority tax claims. Only two classes voted to accept. The plan was confirmed via cramdown over Class 6 objections.
| Class | Description | Treatment | Voting Status | Recovery |
|---|---|---|---|---|
| — | Administrative Claims (§503(b)) | Paid in full on Effective Date | N/A (unimpaired) | 100% |
| — | Priority Tax Claims (§507(a)(8)) | Paid in full per plan terms | N/A (unimpaired) | 100% |
| 1 | Other Priority Claims (§507(a)) | Paid in full | Unimpaired — deemed to accept | 100% |
| 2 | Other Secured Claims | Paid in full / collateral returned | Unimpaired — deemed to accept | 100% |
| 3 | DIP Claims (Sixth Street) | Paid through Waterfall Recovery | Voted to Accept | Waterfall |
| 4 | FILO Claims (Sixth Street) | Paid through Waterfall Recovery | Voted to Accept | Waterfall |
| 5 | Junior Secured Claims | Pro rata after senior claims | No identified holders | Unknown |
| 6 | General Unsecured Claims | Pro rata share of Shared Proceeds Pool | Voted — Did NOT Accept | Unknown |
| 7 | Intercompany Claims | Cancelled at debtor option | Deemed to accept/reject | $0 |
| 8 | Intercompany Interests | Cancelled, released, extinguished | Deemed to reject | $0 |
| 9 | Common & Preferred Equity | Cancelled, released, extinguished | Deemed to Reject | $0 |
| 10 | Section 510(b) Claims | Cancelled, released, extinguished | Deemed to Reject | $0 |
Sources: Doc 2160 (Second Amended Plan); Doc 2172 (Confirmation Order); Doc 2140 (Voting Results)
Distribution Waterfall
The plan uses a two-track waterfall structure with a sharing mechanism overlay, depending on whether proceeds derive from prepetition collateral or DIP collateral.
Track A: Prepetition Collateral
Track B: DIP Collateral (Non-Prepetition)
Sharing Mechanism — Critical Data Gap
A sharing mechanism overlay (Final DIP Order ¶60, Doc 729) governs how proceeds split between DIP/FILO holders and the estate-side shared pool after threshold triggers. The exact sharing ratio has not been disclosed in the obtained documents. This is a key unknown for calculating GUC recovery.
Sixth Street Triple Position
Sixth Street Partners holds a unique triple role in BBBY's bankruptcy, appearing at three separate levels of the capital structure and governance.
DIP Lender (Class 3)
$40 million superpriority DIP facility. Sixth Street was the only lender willing to provide debtor-in-possession financing. First-in-line for non-prepetition DIP collateral.
Source: Doc 10 ¶77-79; Doc 729
FILO Lender (Class 4)
$375 million First-In-Last-Out term loan facility, originated August 31, 2022. First-in-line for prepetition collateral proceeds under the waterfall.
Source: Doc 10 ¶46
Oversight Committee
Ari Mazo of Sixth Street served on the Oversight Committee, giving Sixth Street governance visibility into post-effective plan administration.
Source: Doc 2161 (Amended Plan Supplement)
What This Means
One entity holds positions in the two highest-priority secured classes and has governance oversight. Both classes voted to accept the plan. Class 6 (general unsecured creditors) voted to reject — but the plan was confirmed via cramdown over their objection.
Professional Fee Breakdown
Total confirmed debtor-side professional fees: $19,913,709.52 (Doc 2729, Exhibit A). Committee-side fees are partially known. No objections were filed to the fee applications (Doc 2740).
| Professional | Role | Amount | Status | Source |
|---|---|---|---|---|
| Kirkland & Ellis (K&E) | Debtor Lead Counsel | $13,720,000 | Approved | Doc 2656; Doc 2729 |
| Cole Schotz | Debtor Co-Counsel | $2,550,000 | Approved | Doc 2729 |
| Pachulski Neff | Committee Counsel | $2,659,288 | Approved | Doc 2687 |
| Alvarez & Marsal | Financial Advisor | — | OCR Garbled | Doc 2682 |
| Gibbons P.C. | Committee Co-Counsel | — | OCR Garbled | Doc 2686 |
| ASK LLP | Special Counsel to UCC | — | OCR Garbled | Doc 2681 |
Committee-side fee applications (A&M, Gibbons, ASK) were obtained as scanned PDFs with poor OCR. Exact amounts require manual extraction from originals. Pachulski breakdown: $2,638,974.00 fees + $20,313.79 expenses.
Asset Sales & IP Transfers
Key assets were sold during the bankruptcy, but purchase prices remain sealed in court exhibits.
| Asset | Buyer | Price | Date | Source |
|---|---|---|---|---|
| Bed Bath & Beyond IP/Brand | Overstock.com, Inc. | SEALED | Jun 28, 2023 | Doc 1117 |
| buybuy BABY IP/Brand | Dream On Me parties | SEALED | Jul 11, 2023 | Doc 1314 |
| Store Inventory (Liquidation) | Various (store closing sales) | Unknown aggregate | Jun–Jul 2023 | Doc 641 |
| Lease Portfolio (Phase 1 + 2) | Various lease purchasers | Unknown aggregate | May–Jul 2023 | Doc 422 |
Sealed Pricing — Major Evidence Gap
Both major IP sales (Overstock and Dream On Me) have sealed purchase prices. Without these figures, it is impossible to calculate total estate recovery, waterfall distribution amounts, or GUC recovery percentages. Unsealing these exhibits would be the single highest-impact discovery action for understanding how much value was realized from BBBY's brand assets.
Cohen Codebtor Analysis
BBBY's Schedule H (Doc 568, 1,176 pages) lists Ryan Cohen and RC Ventures LLC as codebtors on the same 13 unique creditor entries. Source: Filed May 30, 2023.
Securities Class Action (SI v. BBBY)
Cohen, RC Ventures, Sue Gove, and JPMorgan Securities are all listed as codebtors on the Pengcheng SI securities class action entry (Schedule H entries 2.622–2.641). BBBY was later dismissed from the case due to the bankruptcy stay — but the sworn codebtor designation confirms the co-defendant relationship.
Judith Cohen Lawsuit (Separate Individual Action)
Cohen and RC Ventures are listed as codebtors on a separate individual federal securities lawsuit — Cohen, Judith v. Ryan Cohen, RC Ventures, and Bed Bath & Beyond Inc. (S.D.N.Y. Case No. 22-CV-09733). Status: CLOSED. This action named Cohen and RC Ventures but notably did not name Gove or JPMorgan, suggesting a narrower legal theory focused on Cohen's personal trading.
Municipal Mapping Anomaly
Cohen and RC Ventures also appear as codebtors on 10 municipal creditor entries (cities from Tyler, TX through Victoria, TX). Analysis reveals this is a systematic database mapping error in Kroll's claims database — four separate class action defendant groups are each confined to contiguous alphabetical blocks of "City of" creditors. The municipal codebtor designations are artifacts, not meaningful legal relationships. The SI and Judith Cohen entries are confirmed as legitimate sworn codebtor designations.
Docket Gaps & Missing Documents
Of 2,740+ docket entries, 44 PDFs have been obtained. These are the priority missing items.
| Priority | Document | Status | Impact |
|---|---|---|---|
| P1 | Debtors' Reply to Confirmation Objections | Not Obtained | Would address Safety National objection (Doc 2099) |
| P1 | Overstock APA (Doc 1117 exhibit) | Sealed | IP purchase price unknown |
| P1 | Dream On Me APA (Doc 1314 exhibit) | Sealed | IP purchase price unknown |
| P2 | Committee-side fee applications (exact amounts) | OCR Garbled | A&M, Gibbons, ASK LLP amounts unreadable |
| P2 | Claims register / bar date order | Not Obtained | Need Cohen/RC Ventures proofs of claim |
| P3 | 341 meeting transcript | Not Obtained | May contain admissions re: buybacks, JPMorgan |
| P3 | Post-effective date Plan Administrator reports | Not Obtained | May indicate DK Butterfly authorization |
| P3 | SEC proof of claim | Not Obtained | Whether SEC asserted claim in bankruptcy |
Cross-Case Connections
The bankruptcy intersects with both active litigation matters through shared actors, preserved evidence, and structural outcomes.
Bankruptcy → DK Butterfly
- Renamed entity (DK Butterfly) is the plaintiff in §16(b) action
- Plan Administrator Goldberg controls post-effective litigation
- Class 9 equity cancellation confirms zero shareholder recovery
- Transfer restrictions during case may affect share-count calculations
Bankruptcy → SI v. BBBY
- Chapter 11 filing stayed BBBY as defendant; only Cohen/RC Ventures remain
- Zero equity recovery establishes actual harm to plaintiff class
- DIP/FILO priority structure contributed to equity wipeout
- Codebtor designations confirm co-defendant relationships
| Actor | Bankruptcy Role | Litigation Role |
|---|---|---|
| Ryan Cohen / RC Ventures | Exited pre-bankruptcy (sold 9.5M shares for $178M gross) | Defendant in both DK Butterfly & SI cases |
| JPMorgan Chase | Prepetition ABL agent ($1.13B facility) | Subpoenaed in DK Butterfly; named in SI |
| Sixth Street Partners | FILO/DIP agent; Oversight Committee member | Structural beneficiary of waterfall priority |
| Michael I. Goldberg | Plan Administrator (wind-down) | Controls DK Butterfly litigation on behalf of estate |
| Sue Gove | CEO during filing; First Day declarations | Dismissed from SI case; deposed re: Cohen |
Key Bankruptcy Dates
Chapter 11 Petition Filed
Case No. 23-13359 (D.N.J.). 739,056,836 common shares outstanding. Holly Etlin CRO/CFO provided 93-page First Day Declaration (Doc 10).
DIP Financing Approved
$40M superpriority DIP facility from Sixth Street — the only willing lender (Doc 10 ¶77-79).
Overstock IP Sale Approved
Bed Bath & Beyond brand sold to Overstock.com. Purchase price sealed (Doc 1117).
Dream On Me IP Sale Approved
buybuy BABY brand sold. Purchase price sealed (Doc 1314).
Plan Confirmed via Cramdown
Class 6 (GUC) voted to reject; plan confirmed over objection. Classes 9 and 10 deemed to reject. Doc 2172.
Effective Date
Entity renamed to 20230930-DK-Butterfly-1, Inc. All common equity cancelled at $0. Wind-down under Plan Administrator Goldberg begins.
Fee Approval Order
$19,913,709.52 in debtor-side professional fees approved (Doc 2729). No objections filed.