Bed Bath & Beyond (NASDAQ:BBBY) has avoided bankruptcy so far, although the future is still unclear as ever. Last Friday, it was announced that the retailer’s operations in Canada were insolvent through a court filing. The company operates a total of 54 Bed Bath stores and 11 Buy Buy Baby stores in its Canadian division. BBBY stock is down 15% this morning.
Consultant firm Alvarez & Marsal (A&M), who is in charge of monitoring Bed Bath’s Canadian business in the court case, broke the news. A&M is a multinational firm that operates across five continents with more than 7,000 employees.
Meanwhile, the court filing stated that Bed Bath’s Canadian division does not have the “capacity or ability to independently effect a recapitalization or restructuring of the Canadian operations without access to cash and the support” of lenders or the parent company. As of Nov. 26, Bed Bath’s Canadian division had about $427.4 million in assets and about $342.8 million in liabilities. Buy Buy Baby had assets of $52.7 million and liabilities of $86.9 million.
BBBY Stock: Bed Bath’s Canadian Division Faces Insolvency
This comes even after the home goods company raised $225 million in gross proceeds from the public offering of 23,685 shares of Series A convertible preferred stock, warrants to purchase 84,216 shares of Series A convertible preferred stock, and warrants to purchase 95.38 million shares of common stock. Bed Bath will receive another $800 million in gross proceeds through future installments if “certain conditions” are met.
The preferred stock warrants will be immediately exercisable with a price of $9,500 per share and will expire one year from the issuance. The common stock warrants will also be immediately exercisable at a price of $6.15 per share and will expire five years from the issuance date. If there are not enough authorized shares to exercise the common stock warrants, then investors can choose to exercise on an “alternate cashless exercise” basis. Finally, the Series A convertible preferred stock can be exercised at any time into common stock with a conversion price of $6.15.
On the other hand, Jefferies analyst Jon Matuszewski believes that a potential bankruptcy may already be priced into BBBY stock. He adds that the potential to receive $800 million from the public offering is bullish, given BBBY’s market capitalization of less than $300 million.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
