Bed Bath & Beyond’s Stock Offering Is Backed by Hudson Bay Capital
The deal with Hudson Bay came together within the past several weeks, the two people familiar with the matter said. Late last month, JPMorgan Chase, which helped give Bed Bath & Beyond a lifeline this summer by expanding its credit line, froze the retailer’s credit accounts after notifying it that it was in breach of the terms of its debt. As Bed Bath & Beyond raced to find cash to pay its debts, tensions built over the amount information it was sharing with its banks and other creditors and how quickly it was relaying it to them, the people said.
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The retailer’s lenders had dealt with a great deal of turbulence over the past few months. In early September, weeks after Bed Bath & Beyond secured rescue financing from JPMorgan and the investment firm Sixth Street, the company’s chief financial officer died in what was ruled a suicide. Industry executives have questioned whether the retailer had the right management in place to weather its challenges.
“As we saw this slow train wreck occurring, at no time did they appoint any sort of restructuring professional to either the C.E.O. position, C.O.O position or anywhere on the board of directors — or anybody with real restructuring expertise,” said David Tawil, president of Prochain Capital. “It’s not like you’re dealing in an industry that hasn’t seen a lot of restructurings.”
On Monday, Bed Bath & Beyond said Holly Etlin had been hired as the interim chief financial officer. Ms. Etlin has experience with restructurings and company turnarounds.
Rising interest rates have also made lenders warier of plowing more money into distressed companies like Bed Bath & Beyond. But equity may prove to be a new alternative.
Bed Bath & Beyond’s move echoes what appears to be a new playbook for distressed retailers. Another indebted company favored by meme traders, AMC Entertainment, sold investors preferred shares in August after common shareholders balked at its efforts to issue more stock, which dilutes the value of shares that are already held. Both sets of AMC shares have remained volatile. In 2020, Hertz tried to sell shares after filing for bankruptcy, but the Securities and Exchange Commission squashed those efforts.
“For those who are in this situation, for those who are desperate, this will be one instrument that they can use,” said Douglas Chia, the head of Soundboard Governance, a corporate governance consultancy. “Every couple years there’s a new instrument that investment bankers come up with, and it’s creative and it becomes the flavor of the month and everyone starts to use that. This could be the same thing.”