The unusual $1 billion financing arrangement—with $225 million upfront and installments paid over the rest of the year—will buy the unprofitable retailer more time to fix its business. The hedge fund stands to profit as long as the company can stay out of bankruptcy court this year and its stock stays above 72 cents.
Investors, employees and vendors are divided on whether it will be enough. Bed Bath & Beyond lost more than $1 billion in the nine months ended on Nov. 26. It has projected steep sales declines for another quarter and needs to stem its losses to avoid burning through its rescue package, as it did with a September financing deal.
The company’s stock, which was trading near $6 the day the rescue was announced, has fallen back below $2 this week. The bonds are trading at between 11 and 27 cents on the dollar, according to Finra data.
I wondered the same thing. When Linens & Things went under a few years ago I thought “well, they have the category to themselves, now they’ll be OK.” Apparently not.
They drastically tightened their returns policy about a year ago, and that’s when they lost me.
The Hudson Bay-led rescue package provides Bed Bath & Beyond with $225 million upfront and up to $800 million over time.
The deal also enables the Hudson Bay investors to acquire Bed Bath & Beyond’s common shares, likely at a discount, and then sell them back into the market.
If fully exercised, analysts say, the deal could take the number of shares outstanding to as many as 900 million, from more than 100 million earlier this year.
