Bed Bath & Beyond Inc. has lined up investors for an 11th-hour cash infusion that would allow it to stave off a bankruptcy filing, according to people with knowledge of the matter.
The retailer, which has been preparing for a Chapter 11 filing after lenders declared it in default last month, plans to issue convertible preferred securities and warrants, it said in a Feb. 6 statement, in a deal that would ultimately raise more than $1 billion.
The company has gathered orders from institutional investors that would cover the full offering, said the people, who asked not to be identified because the details are private. A significant chunk of the orders are coming from one anchor investor, said one of the people, who wouldn’t identify the investors.
The company would raise $225 million immediately through the sale of convertible preferred shares and common equity warrants. The fresh cash would allow the company to cure a default on an asset-based loan and make overdue debt payments that it missed this month.
The company could raise another $800 million over time through the execution of the warrants it issues.
In a statement, a Bed Bath & Beyond spokeswoman said the company “provided a detailed disclosure earlier today and will not be commenting further due to regulatory requirements.”
Earlier this month, Bed Bath & Beyond said net sales plummeted 33% in its fiscal third quarter, as the retailer struggles to stay afloat. Digital sales also fell 33%.
Unimpressed with move by BBBY investors
One analyst covering the stock said new investments won’t save the retailer. In a research note, Wedbush Securities analyst Seth Basham said Bed Bath & Beyond shares will soon be worthless, calling the equity financing a “last gasp” before the company eventually files for bankruptcy protection.
Even if Bed Bath & Beyond completes the transactions, “the additional capital provides the company with just a few more quarters of room to turn around its operations,” Basham wrote. He cut his price target on Bed Bath & Beyond to $0 from $1 and reiterated his underperform rating on the stock. Basham didn’t immediately respond to a request for further comment. Last month, KeyBanc Capital Markets said Bed Bath & Beyond shares were only worth a dime.
Bed Bath & Beyond ranks No. 30 in the Digital Commerce 360 Top 1000.
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