Bed Bath & Beyond shares to be sold in bid for bankruptcy

Bed Bath & Beyond Inc. is trying to avoid bankruptcy by looking to the public markets to find new cash.

It will issue convertible preferred securities as warrants to the retailer, which had been in preparation for a Chapter 11 bankruptcy filing. The company hopes to raise more than $1 million from the offerings.

According to the statement, it will use the proceeds of the sale and a draw on its credit line to repay the debt due under its asset based loan. It will also pay overdue interest on some of its debt.

A spokesperson for Bed Bath & Beyond didn't immediately respond when we asked her for comment. The company stated that it could not guarantee it would receive all or any portion of the proceeds from the sales.

Bed Bath & Beyond made public warnings about its solvency problems and stated that it is considering bankruptcy. It entered a 30-day grace period after it defaulted on a credit card line and skipped interest payments for some of its debts. Bloomberg News reported that it has struggled to find buyers to finance it and eventually emerge from bankruptcy.

Despite the fact that its options seemed limited, the stock of the company has experienced a volatile rebound from its decade-lows over the past week. The share price jumped 92% Monday to close at $5.86, just before the announcement. It then fell in the immediate aftermarket.

Holly Etlin, who is a partner and managing Director at AlixPartners, was also appointed interim chief financial officer. AlixPartners is just one of many firms that have been working with Bed Bath & Beyond in order to reduce costs and try a business turnaround.

Convertible preferred stock typically pay dividends and allow holders to convert their equity into common stocks. This offering is popular with cash-strapped companies looking to raise capital.

The home goods retailer stated that it would also use some of the proceeds from the share sale to rebuild its merchandise. It's a difficult task. It's not certain that the company will be able stop its decline even with a cash injection. The new funds could just prolong its long-term decline.

During the last two earnings calls, company executives stated that sales have improved when they have enough merchandise - a sign that there is still consumer demand to buy Bed Bath & Beyond products.

Even if the company is able raise enough cash on public markets to pay some suppliers - many shoppers have given up on the home goods industry and it will be difficult to win them back, analysts and suppliers say. It can be expensive to upgrade tired-looking stores or to invest in marketing to let customers know if the stores are stocked again. Suppliers will likely be cautious about shipping their products to the ailing retailer.