Bed Bath & Beyond Warns of Bankruptcy If Equity Offering Fails

Bed Bath & Beyond has issued a warning that it could face bankruptcy if it fails to raise $300 million through an equity offering, leaving the company on the brink of liquidation. The company had secured an 11th-hour rescue from Hudson Bay Capital Management, which is no longer available. Shares of the company fell by 25% after the announcement.

Expected Financial Results and Fundraising Efforts

Bed Bath and Beyond expects its net sales for its fiscal fourth quarter to fall to $1.2 billion from $2.05 billion a year ago, which is below the FactSet consensus of $1.43 billion. The company also expects its same-store sales from stores and digital channels operating for at least 12 months to fall 40% to 50% from a year ago, compared to the FactSet consensus of a decline of 28.3%.

To counter its plummeting revenues, Bed Bath and Beyond has launched an “at-the-market” offering of up to $300 million worth of common shares through B. Riley. Its current market capitalization is $78.3 million. The company has also entered into a stock purchase agreement with B. Riley Principal Capital II to provide additional capital to the company, while terminating its previous public offering of equity and warrants to buy convertible preferred stock.

Since the beginning of February, Bed Bath and Beyond has raised $360 million of equity capital, cured its default under its credit agreement, repaid material amounts of its ABL facility, and completed its interest payment for its Senior Notes.

Bed Bath & Beyond plans to have 360 stores by the end of April, less than half of what it had in the autumn as it has been shuttering hundreds of stores across the US and laying off thousands of employees.

Bed Bath & Beyond in Operational Challenges

Bed Bath & Beyond faces mounting operational challenges due to the failed pivot to bolster private-label offerings. Preliminary results for the company show continued operating losses and a comparable decline in sales around the 40% to 50% range.

With the latest equity offering, the company will further dilute current investors. Bed Bath & Beyond plans to send all net proceeds from the share sale to its lenders on Wall Street.

The company will publish its 2022 fourth quarter and full-year results at the end of April, which will show whether its fundraising efforts have been successful in stabilizing the business or if bankruptcy is imminent.

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