In announcing a new financial deal this morning that essentially pushes out its repayment deadlines on most of its debt Bed Bath & Beyond has bought itself some time to try to turn itself around.
The terms of the new arrangement exchanges the retailer’s most pressing debt that was to be due in 2024 and was unsecured for new loans now due three years later in 2027. Perhaps most importantly these loans are secured on second lien convertible and non-convertible terms. Some of the debt, which amounted to about $285 million in total, will now also carry higher interest rates.
The company also refinanced additional debt, $225 million due in 2034 and $675 million due in 2044 and both unsecured, into higher rate third-lien secured notes. However both of these are now due in 2029.
Essentially, BBB now has more time to try to get its cash flow back into the positive column, but at a cost of higher rates and loans that are secured. Earlier this month Bloomberg, in reporting on the possibility of this happening, said it would “give note-holders a second-lien claim on most or all of the company’s assets in exchange for the term extension.”
Sue Gove, interim CEO of Bed Bath in announcing the new financing said, “We believe this transaction will put us in a stronger financial position going forward by significantly reducing our debt and interest expense upon a successful completion. By proactively focusing on our senior notes, we also intend to address the maturity of our nearest-term 2024 notes and any impact they may have on our current and future business.”
She added, “This transaction is intended to create greater stability and flexibility in our business which we believe benefits all stakeholders.”
Along with new financing the company announced last month Bed Bath will have the credit line to try to rebuild its business and balance sheet following several years of losses and declining sales. But it does come at the cost of essentially mortgaging itself, a position it had never been in before. In fact for years BBB had one of the cleanest balance sheets in all of retailing, actually reporting earned interest on its savings. But that was a long time ago…and in a retail galaxy far, far away.
Bed Bath & Beyond stock opened higher on the news Tuesday morning, however by mid-morning it had given back some of those gains, but remained up about 3%, trading at $5.32 a share.
WarrensReport 