“We expect that we will likely file for bankruptcy protection if the Transactions are not consummated,” Bed Bath & Beyond said.
bed bath and beyond (BBBY) – Get a free reportShares fell Tuesday after the struggling home goods retailer said it will raise about $1 billion from a preferred stock sale as it seeks to avoid an impending Chapter 11 bankruptcy filing.
Bed Bath & Beyond said the two-part sale would include $225 million in convertible preferred shares and another $800 million in warrants attached to the newly issued shares. The Wall Street Journal reported Tuesday that investors are prepared to support the first phase of the sale, with support for the remaining capital increase emerging “over time.”
The retailer, which defaulted on a loan to JPMorgan last week, can expect to take advantage of yesterday’s rise in its share price, which sent shares of Bed Bath & Beyond soaring 92% in the session to a yearly high. of $5.86 each, pegging their market value at around $687 million.
If the capital raise fails, Bed Bath & Beyond said, “it will probably file for bankruptcy,” noting that it had appointed restructuring expert Holly Etlin as interim chief financial officer.
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“We need the proceeds from the transactions to pay our outstanding obligations under our lines of credit and senior notes and to operate our business, and we expect that we will likely file for bankruptcy if the transactions are not consummated,” Bed Bath & Beyond. he said in a Securities and Exchange Commission filing Monday night.
Shares of Bed Bath & Beyond were marked 32.25% lower in premarket trading to indicate an opening price of $3.97 apiece.
Bed Bath & Beyond posted a larger-than-expected third-quarter loss of $393 million Tuesday as sales fell 33% from last year to $1.26 billion, and it said it is exploring “multiple avenues” in its recovery strategy while accelerating plans for store closures. and cost reduction.
Even so, the group’s shares have rallied more than 260% in the past 30 days, with strong options trading following chief executive Sue Gove’s original warning that the group could file for protection by Chapter 11 bankruptcy in the coming months.
Shareholders typically get nothing from the Chapter 11 filing, as the courts consider them owners of the company rather than creditors, though restructuring experts sometimes get a small share of the recovery for equity investors as a token. of goodwill, especially if they want those same investors to buy shares in the entity coming out of the Chapter 11 process.
Bondholders have a completely different view of their prospects, even though they are much higher on the list of creditors likely to recover assets in the event of a Chapter 11 filing, with the traders pegging their $300 million bond due in August 2024. which has a coupon of 3.749%, at only $7.52 per $100.
Standard & Poor’s said last month that Bed Bath & Beyond, while not in “active default,” remains highly vulnerable to the “virtual certainty” of a restructuring. The rating agency said that is based on its “deteriorating liquidity position, difficult operating conditions and imminent maturities” of its debt.
