Feb 6 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) said on Monday it planned to raise around $1 billion through a preferred stock and warrant offering in a last-ditch effort to avoid the bankruptcy.
The home goods retailer said in the securities filings that if it could not complete the complex transaction, it would “likely file for bankruptcy protection.” The chain has said in recent weeks that it has defaulted on a loan and may not be able to stay in business, raising concerns about its future.
Bed, Bath & Beyond has been in talks in recent days with an investment firm to underwrite a significant portion of the proposed offering, two people familiar with the matter said.
Shares of the retailer, which closed up 92.1% at $5.86 in a rollercoaster session, fell 33.5% in extended trading after news of the proposed bid.
Bed Bath & Beyond has been part of the meme stock phenomenon, with shares soaring as much as 400% in the past year when activist investor and Gamestop Corp (GME.N) chairman Ryan Cohen took participation and requested changes.
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Bed Bath said it expects to raise just over $1 billion through the sale of preferred shares and warrants and securities when the warrants are exercised.
Bed Bath will receive a waiver over its recent bank default if the proposed offer is successful, the company said.
The beleaguered retailer said it would use the proceeds from the offer to repay outstanding revolving loans which it would then use to make an interest payment on bonds it defaulted on Feb. 1. He also plans to draw an additional $100 million from a first-to-last loan from investment firm Sixth Street, which has priority for repayment in the event of bankruptcy.
Los Angeles-based investment bank B. Riley Securities is the sole bookrunner on the deal, earning up to a maximum commission of $10 million.
Bed Bath & Beyond has also appointed bankruptcy expert Holly Etlin as interim chief financial officer.
New Jersey-based home goods retailer Union, which rose to popularity in the 1990s as a go-to shopping destination for couples doing wedding registries and planning new babies, has seen demand plummet in recent years. years as its merchandising strategy to sell more store brand products failed.
In January, the company raised doubts about its ability to continue business just months after announcing more than $500 million in new funding, along with job cuts and the closure of 150 stores.
On Monday, Bed Bath announced plans to close 150 more stores, in addition to the 250 store closures previously announced.
Bed Bath & Beyond said in January that it defaulted on a loan from JPMorgan Chase Bank NA Bloomberg News reported that the company’s efforts to find a buyer have also stalled.
After filing for bankruptcy, rental car provider Hertz Global Holdings (HTZ.O) attempted to sell new shares but withdrew the offer after the US Securities and Exchange Commission (SEC) States raised concerns without giving details.
“It’s a similar situation where a company in serious financial trouble tries to sell securities,” said Lynn LoPucki, a professor at the University of Florida. “The same considerations operate in both situations. The fact that one is bankrupt and the other is not would make no difference in terms of SEC regulation.”
Sources told Reuters that Bed Bath & Beyond has hired liquidators to close additional stores unless a last-minute buyer emerges.
Reporting by Noor Zainab Hussain, Jessica DiNapoli and Mike Spector; additional reporting by Granth Vanaik, Manya Saini and Shankar Ramakrishnan; Editing by Anil D’Silva and Anna Driver
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