Bed Bath & Beyond Inc. is getting ready to file for bankruptcy as early as this weekend, as the embattled retailer struggles with raising enough capital to avoid default due to plummeting stock prices, sources familiar with the matter said.
The company recently said it needed to generate $300 million from share sales by April 26 to stay out of bankruptcy. If it fails to meet the deadline, the company will lose eligibility to continue selling stock under its share registration documents, The Wall Street Journal reported.
The stock closed at 46 cents on Wednesday, leaving Bed Bath & Beyond with an uphill battle to raise the necessary funds within the allotted time.
The company shares dropped nearly 25% early Thursday morning.
The retail chain had raised $48.5 million from its most recent stock-sale initiative as of April 10. However, with only 178 million shares available for sale at the time, the company was expected to generate only $70 million to $80 million due to the stock’s recent trading prices.
Bed Bath & Beyond didn’t respond to noti.group’s request for comment.
Bed Bath & Beyond first revealed its potential bankruptcy in January. However, with the $225 million gained from stock sales and a pledge for $800 million to pay down its debt load in February, the company managed to stave off Chapter 11.
It has warned that without sufficient capital from its equity offering, bankruptcy and asset liquidation are likely. .
The home-goods retailer’s business has been declining, with preliminary results indicating a 40% to 50% drop in comparable-store sales for the quarter that ended on February 25.
The company may get more time to raise capital from equity investors, but obtaining shareholder authorization to issue more equity is necessary and will be decided by a vote on May 9.
Government filings show that Bed Bath & Beyond is additionally constrained by a schedule imposed by its lenders, Sixth Street Partners and JPMorgan Chase, mandating the company to generate $232 million by June 27.
Holders of 428 million shares as of March 27 are eligible to participate in the vote, and the financially struggling company must obtain a majority for the proposal to be approved.
The fact that Bed Bath & Beyond stock is primarily owned by individual investors, according to investors and analysts, could pose a challenge for the company in securing the required votes.
Generally, it is more challenging to gather votes from a widely scattered group of retail investors than from a smaller, more concentrated group of institutional firms.
Last month, Bed Bath & Beyond terminated a unique financing arrangement with hedge-fund manager Hudson Bay Capital Management LP, which was intended to provide up to $1 billion over 10 months to support the company’s revitalization efforts.
With Post wires
[Written in collaboration with other media outlets with information from the following sources]
