(Bloomberg) -- Hudson Bay Capital Management is the anchor investor of the share sale launched Tuesday by Bed Bath & Beyond to stave off bankruptcy, according to people with knowledge of the matter.
The embattled retailer lined up investors for an eleventh-hour cash infusion that would allow it to keep operating outside of Chapter 11 protection, Bloomberg previously reported.
Hudson Bay, a New York-based multi-strategy hedge fund, comprised the largest order among several institutional investors that helped Bed Bath & Beyond enter into the transaction Tuesday, said the people, who asked not to be named discussing private company information. B. Riley Securities Inc. arranged the deal.
The company gathered orders from institutional investors to cover the full offering, which will ultimately raise more than $1 billion. Bed Bath and Beyond also worked with advisers from Kirkland & Ellis, Lazard and AlixPartners.
Bed Bath & Beyond raised about $225 million Tuesday, which the company said it will use immediately to make outstanding payments to some creditors. It also said it expects to receive an additional $800 million of proceeds from the offering, subject to certain conditions.
“This transformative transaction will provide runway to execute our turnaround plan,” Bed Bath & Beyond Chief Executive Officer Sue Gove said in a statement.
The securities deal likely gives the company some breathing room to avert an imminent financial crunch. At the same time, Bed Bath & Beyond warned in a securities filing on Monday that it might have to file for bankruptcy protection even if the offering is completed.
The company tumbled a whopping 49% Tuesday with one analyst cutting their price target to $0.
A Bed Bath & Beyond spokeswoman declined to comment on the investors in the offering. A representative for Hudson Bay declined to comment, as did a representative for B. Riley Securities.
“Trading in our securities is highly speculative,” the company said in the Monday filing. It also warned the firm “may not be successful in implementing our transformative plan, including building back our inventory and increasing customer sales, and we have historically underperformed in implementing management plans.”
In a statement after the market close on Tuesday, the retailer said it’s continuing to shutter stores and aims to have around 360 Bed Bath & Beyond stores and 120 Buybuy Baby stores in the US. The company has fewer than 700 Bed Bath & Beyond stores and lists 122 Buybuy Baby stores on its website. In the statement, the home-goods retailer didn’t specify the time frame for the closures. It also said it will bolster its portion of digital sales.
“We are also prioritizing availability of leading national and emerging direct-to-consumer brands our customers know and love,” Gove said.
Many shoppers turned their backs on the company when it pivoted sharply to private-label brands a couple of years ago.
Bed Bath & Beyond attracted the attention of meme-stock traders in early 2021, and its share price has proved especially volatile ever since the company indicated it was preparing for a potential bankruptcy filing. Shares had surged by a record 92% on Monday as of the close, ahead of Tuesday’s decline.
The home-goods retailer will also use the cash to rebuild merchandise, it said, as the difficulty in maintaining sufficient inventory has contributed to its poor sales.
But even with a fresh financial cushion, the new funds could end up simply extending the company’s long decline given a vanishing customer base and the cost of re-stocking. Add a battle to win trust from suppliers, and a turnaround plan is looking like a long shot.
--With assistance from Jeannette Neumann.
(Updates with details on the retailer’s plans to close some stores)
©2023 Bloomberg L.P.
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