US retailer Bed, Bath & Beyond has offered $1.025bn in financing to save it from bankruptcy in an eleventh-hour deal that will be used to restructure the company’s debt load out of court.
The home goods retailer is set to raise $225 million initially though the sale of convertible preferred stock, warrants to purchase convertible preferred stock and warrants to purchase common stock. The remaining $800 million will come from the Bed, Bath & Beyond securities issuance, which requires investors to purchase convertible preferred stock “in future tranches provided certain conditions are met,” according to the securities filing.
Bed Bath & Beyond said it will also draw down $100 million from an existing line of credit that was provided last year by private capital manager Sixth Street Partners.
The new cash is to be used to repay existing debt that had become due. Bed Bath & Beyond disclosed last month that two loan facilities totaling approximately $1.5 billion were in default. Last week, the company also failed to make a $25 million interest payment on $1 billion of outstanding bonds.
In agreement with its lenders and bondholders, Bed Bath & Beyond is required to use the new cash to pay down its existing debt.
The announcement followed a wild day of trading for Bed Bath & Beyond shares, which soared nearly 100 percent higher, to nearly $6 per share, meaning a market capitalization of $700 million, even as its The bonds were trading below 15 cents. Dollar. Its shares fell 33 percent in after-hours trading after the offer was issued.
The company cautioned that existing shareholders of its common stock “will be substantially diluted by the issuance of securities in this offering”. It also said it would file for bankruptcy if the financing plan failed.
Bed Bath & Beyond had struggled in recent years as it changed its strategy to focus on store brands rather than well-known national brands. The company said Monday it would close more than 400 stores and cut annual overhead costs by $1 billion. It said it will hit positive operating profit margin later in its fiscal year 2023.
B Riley Securities is the book-running manager for the offering.
