Author of the article:
Noor Zainab Hussain and Mike Spector and Jessica Dinapoli
Published Feb 06, 2023 • 3 minute read
Bed Bath & Beyond Inc said on Monday it was planning to raise some $1 billion through an offering of preferred stock and warrants in a last-ditch effort to stave off bankruptcy.
The home goods retailer said in securities filings that if it can’t complete the complex transaction, it would “likely file for bankruptcy protection.” The chain has said in recent weeks that it had defaulted on a loan and may not be able to remain in business, raising concerns about its future.
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Bed, Bath & Beyond held talks in recent days with an investment firm to underwrite a significant portion of the proposed offering, two people familiar with the matter said.
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Shares of the retailer, which closed up 92.1% at $5.86 in a roller-coaster session, were down 33.5% in extended trading after news of the proposed offering.
Bed Bath & Beyond has been part of the meme stock phenomenon, with shares skyrocketing as much as 400% last year when activist investor and Gamestop Corp chairman Ryan Cohen took a stake and sought changes.
Bed Bath said it was planning to raise just over $1 billion through sales of preferred stock and warrants and from securities when the warrants are exercised.
Bed Bath will receive a waiver on its recent bank default should the proposed offering succeed, the company said.
The embattled retailer said it would use the proceeds of the offering to repay outstanding revolving loans which it would then use to make an interest payment on bonds it missed on February 1. It also plans to draw an additional $100 million from a first-in-last-out loan from investment firm Sixth Street, that takes priority for repayment in a possible bankruptcy.
Los Angeles-based investment bank B. Riley Securities is the sole book runner on the deal, earning up to a maximum fee of $10 million.
Bed Bath & Beyond also appointed Holly Etlin, a bankruptcy expert, as interim chief financial officer.
The Union, New Jersey-based home goods retailer, which shot to popularity in the 1990s as a go-to shopping destination for couples making wedding registries and planning for new babies, has seen demand drop off in recent years as its merchandising strategy to sell more store-branded products flopped.
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.
On Monday, Bed Bath said it planned to close an additional 150 stores, on top of 250 previously announced store closures.
Bed Bath & Beyond said in January it had defaulted on a loan from JPMorgan Chase Bank N.A. Bloomberg News reported that the company’s efforts to find a buyer had also stalled.
After it had filed for bankruptcy protection, rental car provider Hertz Global Holdings attempted to sell new shares but pulled the offering after the U.S. Securities and Exchange Commission (SEC) raised concerns without elaborating on specifics.
“It’s a similar situation in which a deeply financially distressed company is attempting to sell securities,” said Lynn LoPucki, a professor at the University of Florida. “The same considerations are operating in both situations. The fact that one is in bankruptcy and the other is not, would not make any difference in terms of SEC regulation.”
Sources have told Reuters that Bed Bath & Beyond has lined up liquidators to close additional stores unless a last-minute buyer emerges. (Reporting by Noor Zainab Hussain, Jessica DiNapoli and Mike Spector; additional reporting by Granth Vanaik, Manya Saini and Shankar Ramakrishnan; Editing by Anil D’Silva and Anna Driver)