Bed Bath & Beyond, the home goods retailer, has announced its intention to raise $1 billion through the offering of preferred stock and warrants in an effort to avoid bankruptcy. In a securities filing, the company warned that if it is unable to complete the transaction, it may need to file for bankruptcy protection.
The company has recently defaulted on a loan and has raised concerns about its future. Bed Bath & Beyond held discussions with an investment firm to underwrite a large portion of the proposed offering. The retailer’s shares closed up 92.1% on Monday, but fell 43% in early trading on Tuesday after the company priced its offering.
The company will be issuing 23,685 shares of Series A convertible preferred stock, warrants to purchase 84,216 shares of Series A convertible preferred stock, and warrants to buy over 95 million shares of the company’s stock.
Bed Bath & Beyond is hoping to raise $1 billion by selling preferred stock and warrants in an effort to avoid bankruptcy. The home goods retailer stated that if the transaction does not succeed, it would likely file for bankruptcy protection. Bed Bath & Beyond’s shares saw a 92.1% increase on Monday but fell 43% after the offering was priced.
The company is expected to receive about $225 million initially and raise another $800 million in future installments. Despite being part of the meme stock phenomenon with its shares reaching $30 last year, some investors are wary due to the company’s weak balance sheet, high debt, and broken business model.
Futer growth plans of Bed Bath & Beyond in 2023
If the offering succeeds, the company will receive a waiver for its recent bank default. The proceeds will be used to repay outstanding revolving loans, make an interest payment on bonds, and draw $100 million from a loan from investment firm Sixth Street.
Riley Securities, an investment bank located in Los Angeles, is handling the deal as the sole book runner, with the potential to earn a fee of up to $10 million. Bed Bath & Beyond has also appointed Holly Etlin, a specialist in bankruptcy, as interim CFO.
The home goods retailer, based in Union, New Jersey, experienced a decline in demand in recent years due to its failed strategy of selling more store-branded products. This led the company to raise concerns about its future as a going concern just months after securing more than $500 million in new financing and announcing job cuts and 150 store closures.
The company has now announced plans to close an additional 150 stores, on top of the 250 previously mentioned closures. Bed Bath & Beyond defaulted on a loan from JPMorgan Chase Bank in January 2023.