Bed Bath & Beyond is closing another 150 stores after announcing last week that it would be shutting the doors of 87 locations. Even with profits not expected to turn around, the company is looking to make a rally, offering a share sale to investors with the hope of raising more than $1 billion.
In a statement released on Tuesday, the company shared that it priced new convertible preferred stocks and warrants in the hopes of attracting investors and giving the company time before it declares bankruptcy.
A report from Bloomberg citing those familiar with the situation shared that the company has gathered orders from institutional investors that would cover the full offering. At the head of the investor group is one anchor investor, according to the people with knowledge of the matter.
“The Company expects to receive gross proceeds of approximately $225 million in the Offering together with an additional approximately $800 million of gross proceeds through the issuance of securities requiring the holder thereof to exercise warrants to purchase shares of Series A Preferred Stock in future installments assuming certain condition are met,” the statement from the company said.
The move comes as Bed Bath & Beyond is on the doorstep of filing Chapter 11 bankruptcy, as it has closed almost half of the 950 stores it had in February last year.
If the company receives the $225 million through the sale of convertible preferred shares and warrants, it will allow Bed Bath & Beyond to cure a default on an asset-based loan and make payments on debt that are currently overdue.
The company is also keeping its moves private, except for what is shared in filings and press releases, declining comment requests from several news outlets.
According to a regulatory filing with the SEC, the company is not expected to see sales increase throughout its first quarter, as it forecasts a drop of 30% to 40% with “sequential, quarterly sales improvement thereafter.”
Even with sales plummeting, experts expect the stock sale to help the company stay afloat for a little longer. Joel Bines, a recently retired global head of retail for AlixPartners, a consulting company, spoke with Bloomberg about the move.
“This buys them time, but it doesn’t change anything about the fundamental problems of the business,” Bines told Bloomberg.
“If there are buyers for equity that’s very likely to eventually be worthless – I guess it’s Bed Bath & Beyond’s fiduciary duty to sell that equity.”
There is also a world where the stock sale is complete, and the company still needs to file for bankruptcy, according to the filing from Monday. The company said that trading its “securities is highly speculative.”
It continued by saying that the move “may not be successful in implementing our transformative plan, including building back our inventory and increasing customer sales, and we have historically underperformed in implementing management plans.”
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