Bed Bath & Beyond Creditors Organize Ahead of Bond Talks
Bondholders are wary that the home-goods retailer could launch a debt exchange that hurts their interests, people familiar with the matter say
Bed Bath & Beyond Inc.’s bondholders are organizing, looking to protect their investments in the struggling retailer as it looks for ways to ease its debt during a slump in sales, according to people with knowledge of the matter.
Financing adviser Perella Weinberg Partners is working with holders of Bed Bath & Beyond’s unsecured notes due in 2024 ahead of debt talks expected to be held with the company, the people said.
Bed Bath & Beyond said in its second-quarter results last week it is considering launching a distressed exchange that would swap the outstanding bonds for new, longer-tenured debt or equity in the company, based on their trading prices.
But the transactions could take other forms or might not be launched at all, the company said in a securities filing last week. Bed Bath & Beyond didn’t respond to a request for comment Monday.
Perella Weinberg declined to comment. Bondholders are wary about a potentially coercive exchange deal that raises new secured debt but weakens other creditors’ claims on Bed Bath & Beyond’s assets, people familiar with the matter said.
The company said last week it had liquidity of about $850 million as of September, reflecting new loans it secured from its banks and from Sixth Street Partners after the quarter ended.
But the company likely faces another cash crunch unless it can reverse a drop in same-store sales, according to analysts. Last week, it reported a 28% drop in sales for the three months ended Aug. 27, with same-store sales declining 26%.
The company finished the quarter with $135.3 million in cash, slightly up from the $107.5 million it had at the end of its spring quarter, but significantly lower than $970.6 million a year earlier.
Retail analysts questioned the company’s ability to stem its cash burn despite its recent financings.
“We don’t expect Bed Bath’s turnaround will be successful and therefore expect the cash burn will continue” and amount to as much as $1.2 billion next year, according to a BofA Global Research report last week.
Bed Bath’s shares, which lost about 74% in the last six months, closed at $5.99 on Monday.