Bed Bath & Beyond Decides To Sell Warrants And Stock Worth $1 Billion To Meet Financial Commitments

In the latest news headlines today, Bed Bath & Beyond Inc. decided to sell its convertible stock to raise funds to pay interest on its debt. It will also sell warrants and seek an additional credit line of $1 million to avoid filing for bankruptcy.

Bed Bath & Beyond’s stock price is on the rise

In a communiqué on Monday, the retailer said it could not count on generating funds from stock and warrant issues. Despite the dire outlook, the Bed Bath & Beyond stock price has rallied in recent weeks. Its share prices surged by 92% to $6 from $2 in Monday’s trading even before the announcement of the stock and warrant sale to raise funds because traders were optimistic that it could overcome the odds. However, its stock price declined by 37% in the after-market hours. In a recent communiqué, the home goods retailer also said it would file for bankruptcy and its assets would be liquidated if it failed to mobilize funds from the stock sale.

Avoids bankruptcy

Other companies that decided to sell stock to retail investors during the pandemic include AMC Entertainment Holdings Inc. in 2020. The movie theater chain offered its stock to  investors even while preparing to file for bankruptcy. It generated over $2 billion through stock sales and avoided bankruptcy. However, Bed Bath & Beyond is on the brink of bankruptcy compared to AMC Entertainment. 

Revenues drop

In recent quarters, the revenues of Bed Bath & Beyond have declined considerably. It has incurred losses after failing to improve business performance through turnaround efforts. The retailer also warned at the beginning of this year that it may not be able to meet its operating commitments. 

Need to reduce operational losses

Bed Bath & Beyond would need to put in significant efforts to reduce operating losses even if it succeeds in raising funds through a stock offering. According to a news article in the Best News Websites on Monday, the retailer expects to report a fall of 30 to 40% in its Q1. Bed Bath & Beyond hired the services of B. Riley Securities as a book-runner for its equity offering. 

Bed Bath & Beyond expects to generate net proceeds of $225 million by offering convertible stock. It also plans to raise $800 million through a warrant issue. The warrant buyers need to buy more preferred shares soon. The convertible stock gives guaranteed returns to the investors and reduces their losses. Investors could also benefit in the future because of the potential upside of the stock. 

The credit lines of Bed Bath & Beyond were frozen because it failed to comply with debt agreements. It failed to make the interest payments to its bondholders in the previous week. The retailer also closed down some of its stores and prepared to sell its assets. 

According to a filing on Monday, the retailer would use the net proceeds of the equity sale to settle the dues drawn under the credit lines worth $1.5 billion with lenders and banks. As per the agreement that the retailer entered into with the lenders, all payments are to be settled on or before March 3, 2023. According to a communiqué from the retailer, Sixth Street Partners, a lender, agreed to extend a credit line of $100 million. The retailer also received a lifeline of $375 million from Sixth Street in 2022.