Bed Bath & Beyond has been saved for the moment from bankruptcy by an equity investment by Hudson Bay Capital Management. Will it be enough to save the retailer? The Wall Street Journal reports:
Bed Bath & Beyond Inc. BBBY -48.63%decrease; red down pointing triangle couldn’t get banks to lend it money but the troubled retailer found a big hedge fund willing to bet on its stock.
The company landed a do-or-die rescue deal with Hudson Bay Capital Management that takes bankruptcy off the table for now, according to people familiar with the matter. Shares, which have surged in recent weeks despite the company’s dire situation, tumbled nearly 50% on Tuesday as the new financing will dilute existing shareholders.
The retailer, which has announced plans to close hundreds of stores, also said Tuesday it will shut dozens more stores as part of its plan to stay in business. The company now expects to keep open about 360 of its flagship locations, or about half as many as it had a year ago, and 120 Buybuy Baby stores.
The unusual financing deal was made possible by the high trading volumes in Bed Bath & Beyond, which is popular with meme-stock investors. The stock had rallied even as the company warned of bankruptcy that would wipe out shareholders. Movie-theater chain AMC Entertainment Holdings Inc. was able to take advantage of similar activity during the height of the Covid-19 pandemic to sell shares and avoid bankruptcy.
Hudson Bay Capital appears to be betting that it will be able to cash in on the continuing trading in Bed Bath & Beyond shares and at the same time give the retailer funds it could use to dig out of its hole. Analysts said the company still needs to reverse its losses to avoid burning through the rescue, as it did with another lifeline it received in September.
The company has been on the verge of bankruptcy, having missed interest payments to its bondholders after having its credit lines frozen. The company has been closing stores and slashing jobs to stem losses. and has been trying to woo back vendors of brand-name goods.
Its board had been working with advisers preparing the restructuring plans, but opted for the deal with Hudson Bay Capital to avoid a likely liquidation in bankruptcy, some of the people said. The board is still exploring a potential sale of its Buybuy Baby chain, these people said.
Bed Bath & Beyond said Tuesday that it had priced an offering of convertible preferred stock and warrants that will provide it with $225 million upfront and as much as $800 million over time, with B. Riley Securities as sole bookrunner. It also received an additional $100 million credit line from one of its lenders, Sixth Street Partners.
Hudson Bay Capital, a $19 billion hedge fund, is providing most of the fresh investment, the people familiar with the matter said. The New York fund isn’t related to Hudson’s Bay Co., the owner of Saks Fifth Avenue and other retail chains. Bloomberg News earlier reported on the fund’s involvement.
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