"Bed Bath & Beyond's Desperate Last-Ditch Effort to Avoid Bankruptcy: Convertible Preferred Securities and Warrants"

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“Bed Bath & Beyond Takes Major Step to Avoid Bankruptcy With Shares Offering”

(Bloomberg) — Bed Bath & Beyond Inc. is making a last-ditch effort to avoid bankruptcy by turning to the public markets for fresh money.

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The retailer, which has been preparing to file for Chapter 11 bankruptcy, will issue convertible preferred securities and warrants, it said in a statement Monday. The company plans to raise more than $1 billion from the offerings.

According to the statement, the company will use the proceeds from the sale, along with a line of credit, to repay debt due under its asset-based loan. It will also make past-due interest payments on some of its debt.

A spokeswoman for Bed Bath & Beyond did not immediately respond to a request for comment. In the statement, the company said there could be “no assurances that it will receive any or all proceeds from the sales.”

Bed Bath & Beyond has publicly warned of its solvency woes and said it is considering bankruptcy. It defaulted on a line of credit and forfeited interest payments on some of its debts, entering a 30-day grace period. Of late, it’s struggled to find interested buyers to help fund it and eventually emerge from bankruptcy, Bloomberg News reported.

Even as options appeared to be tightening, the company’s stock has seen a volatile rebound from decade lows over the past week. The stock price rose 92% on Monday to close at $5.86 before the announcement before falling in the immediate aftermarket.

The company also named Holly Etlin, a partner and managing director of consulting firm AlixPartners, as its interim chief financial officer. AlixPartners is one of several firms that have partnered with Bed Bath & Beyond to reduce costs and attempt a business turnaround.

goods problems

Convertible preferred stock typically pays dividends and gives holders the option to convert their equity into common stock. The offering is often popular with cash-strapped companies looking for ways to raise capital.

The homewares retailer said it also plans to use some of the proceeds from the stock sale to rebuild its wares. But it’s a tough fight. Even with a cash injection, there’s no guarantee the company can avert its decline, and the new funds could just end up prolonging its long decline.

Company executives said during the last two conference calls that sales have improved when they have enough stock on hand – a sign that there is still consumer demand for Bed Bath & Beyond’s products.

But even if the company can raise enough money in the public markets to pay some suppliers, many buyers have already abandoned the home goods chain and winning them back will be difficult, suppliers and analysts say. And it can be costly to improve tired-looking stores and invest in marketing to let shoppers know when stores are stocking up again. Meanwhile, suppliers are likely to remain wary of supplying their products to the struggling retailer.