Bed Bath & Beyond plans stake sale to avoid bankruptcy

The retailer, which is preparing to file Chapter 11 bankruptcy, will issue convertible preferred securities and warrants, it said in a statement on Monday. The company plans to raise over $1 billion from the offering.

According to the statement, it will use the proceeds from the sale along with the draw on the credit line to repay the debt under the asset-based loan. It will also make overdue interest payments on some of its loans.

A spokeswoman for A Bed Bath & Beyond did not immediately respond to a request for comment. In the statement, the company said it “can make no assurances that it will receive any or all of the sale proceeds”.

Bed Bath & Beyond has publicly warned of its solvency challenges and has said it is considering bankruptcy. It defaulted on a credit line and skipped interest payments on some of its loans, entering a 30-day grace period. More recently, it has been struggling to help finance interested buyers and eventually emerge from bankruptcy, Bloomberg News reported.

Even as its options narrow, the company’s stock has staged a rally from decade lows over the past week. Its share price jumped 92% on Monday to close at $5.86 ahead of the announcement, followed by an immediate aftermarket decline.

The company also named Holly Atlin, partner and managing director at consulting firm AlixPartners, as its interim chief financial officer. AlixPartners is one of several firms working with Bed Bath & Beyond to drive cost reduction and business transformation efforts.

business problems

Convertible preferred stock typically pays dividends and gives holders the option to convert their equity into common shares. This offering is often popular among cash-strapped firms seeking ways to raise capital.

The home goods retailer said it also planned to use some of the share sale proceeds to restructure its inventory. But it’s an uphill battle. Even with any cash inflow, it is not certain that the company will be able to arrest its downfall and the end of fresh funds could only add to its long decline.

Company executives have said during the past two earnings calls that sales improved when they had enough inventory — a sign, they said, that there is still consumer demand for Bed Bath & Beyond’s products.

But even if the firm is able to raise enough cash in the public markets to pay some suppliers, many shoppers have already abandoned the home goods chain and will find it difficult to win them back, suppliers and analysts say. And revamping tired-looking stores and investing in marketing to let shoppers know can be costly if stores become well-stocked again. Meanwhile suppliers are likely to be wary of shipping their products to the ailing retailer.

The text of this story is published from a wire agency feed without any modification.