Bed Bath & Beyond reportedly has lined up investors for a last-minute cash infusion to help the struggling home-goods retailer avoid bankruptcy — but experts are skeptical whether the plan will work.
Hudson’s Bay Capital Management has agreed to anchor a sale of preferred stock that Bed Bath & Beyond disclosed late Monday that would raise more than $1 billion, according to Bloomberg.
Nevertheless, the retailer’s shares — which surged 92% to close at $5.86 on Monday, fueled by the meme stock crowd — were recently down by more than 45% on Tuesday, teetering at $3.
“There is slim to no chance that the plan they announced yesterday will stave off a bankruptcy filing, because the debt hole they are in is too big,” said distressed debt expert David Wander, a partner with Tarter, Krinsky & Drogin.
“If you bought $BBBY at $5.75 you actually deserve to lose money,” tweeted CNBC anchor Jim Cramer.
Tweeted the Maverick of Wall Street, “What the “geniuses” who are chasing bankrupt companies don’t understand is that it’s just a matter of time before these companies use the pumps to dump stock and raise much needed cash.”
Wander added, “shame on Bed Bath & Beyond for taking advantage of the meme crowd who can’t control themselves from throwing good money after bad stocks.”
The company on Monday announced a plan to avoid bankruptcy by securing a $100 million credit line from one of its lenders – Sixth Street Partners – and approval to raise more than $1 billion in the preferred stock sale, according to SEC filings. The funds would be used to pay down its $1.1 billion debt, the company said.
At the same time, the home goods company conceded in filings that if it “will likely file for bankruptcy protection” if all of these transactions are not “fully consummated.”
Bed Bath & Beyond — which defaulted on a loan from JPMorgan Chase in January, setting it on to a path towards bankruptcy — did not offer much hope that its plan will work.
“There are certain conditions to our receipt of the proceeds at each closing, including that our common stock shall remain listed on a national securities exchange, that we have sufficient authorized common stock to issue the shares subject to such closing,” the filing states, adding that “Our existing holders of common stock will be significantly diluted by the issuance of the securities in this offering.”
[Written in collaboration with other media outlets with information from the following sources]
