Bed Bath & Beyond Inc. is preparing a bankruptcy filing for as early as this weekend as its falling stock price makes it near impossible to raise enough capital to avert default, according to people familiar with the matter.
The embattled retailer recently said it needed to raise $300 million from share sales by April 26 to stay out of chapter 11. The company will have to stop selling stock by that date, when it would lose eligibility to continue under its share registration documents. Given the stock’s closing price on Wednesday of 46 cents, Bed Bath & Beyond faces long odds to raise that amount of money within that time.
A spokeswoman for Bed Bath & Beyond didn’t respond to a request for comment.
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As of April 10, Bed Bath & Beyond had raised $48.5 million from its latest stock-sale effort. At the time, it had 178 million shares available to sell, which would only net the company about $70 million or $80 million given the stock’s recent trading prices.
The retailer has warned that if it isn’t able to raise capital through its equity offering, it would have to file for bankruptcy and likely liquidate its assets. Bloomberg reported earlier Wednesday that Bed Bath & Beyond had resumed preparing for bankruptcy.
The home-goods retailer’s business has been deteriorating. Bed Bath & Beyond in preliminary results reported a decline in comparable-store sales of 40% to 50% in the quarter that ended Feb. 25.
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The company could get more time to raise capital from equity investors, but it would need shareholder authorization to issue more equity at a vote scheduled for May 9. Bed Bath & Beyond also faces a schedule imposed by lenders Sixth Street Partners and JPMorgan Chase & Co. requiring the company to raise $232 million by June 27, according to government filings.
Holders of 428 million shares as of March 27 are eligible to vote, and Bed Bath & Beyond will need to win a majority for the proposal to pass.
Bed Bath & Beyond stock is largely held by individual investors, which could make it difficult for the company to round up the needed votes, according to investors and analysts. In general, it is harder to round up votes from a widely dispersed crowd of retail investors than from a smaller group of institutional firms.
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Last month Bed Bath & Beyond ended a novel financing deal with hedge-fund manager Hudson Bay Capital Management LP that was designed to supply the company with as much as $1 billion over 10 months to fund a turnaround.
