Beleaguered retailer Bed Bath & Beyond (NASDAQ:BBBY) announced its plan to raise over $1 billion in capital by issuing convertible preferred securities and warrants. Furthermore, the Wall Street Journal reported on late Monday evening that the company secured investor backing for its offering. BBBY shares plunged nearly 32% in Tuesday’s pre-market trading following a 92.1% jump yesterday due to meme stock frenzy.
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BBBY Tries to Avoid Bankruptcy
BBBY is raising capital to avoid possible bankruptcy. The company expects $225 million of gross proceeds from the initial closing of the offering and additional proceeds of over $800 million if the holder exercises warrants to purchase shares of Series A Preferred Stock in future installments.
The initial proceeds from this offering, coupled with a $100 million additional credit line from lender Sixth Street, would be used to repay outstanding revolving loans due under BBBY’s asset-based loan facility. The company also plans to use the available funds under its amended credit facilities to make the missed interest payment on its senior notes by March 3, 2023. Nonetheless, BBBY cautioned that it would “likely file for bankruptcy protection” if it fails to complete the planned offering.
The company also disclosed that it has hired Holly Etlin as its interim CFO, replacing Laura Crossen, who will continue as chief accounting officer. Etlin has been a partner at AlixPartners, a restructuring firm that has been advising BBBY. The company also disclosed plans to shut down an additional 150 stores on top of 250 previously announced store closures.
BBBY recently disclosed that it received a default notice from JPMorgan (NYSE:JPM). The company’s losses have been mounting as demand dropped in recent years due to increased competition and its strategy to sell more private-label products.
Is BBBY a Buy or Sell?
Wall Street is highly bearish about Bed Bath & Beyond. The Strong Sell consensus rating for BBBY is based on six unanimous Sells. The average BBBY stock price of $1.36 implies a possible downside of nearly 77%.
