What happened
Shares of Bed Bath & Beyond (BBBY) were pulling back today after the struggling retailer announced another debt exchange.
The stock closed down 5.3% as a result.
So what
In a press release this morning, Bed Bath & Beyond said it was entering into a privately negotiated exchange agreement with institutional investors, having lenders exchange notes due in 2024, 2034, and 2044 with a combined face value of $69 million for 11.7 million shares of common stock.
The move alleviates some of the retailer's debt burden and will help lower its interest expense.
CEO Sue Gove said, "Building on our bond exchange transaction from last week, we are pleased to announce additional progress toward greater financial flexibility, with further reduction of our long-term debt, particularly our nearest-term 2024 Notes."
Last week, the company traded 2.8 million shares for debt with a face value of $31.5 million that matures in 2034 and 2044.
Now what
Today's transaction will dilute current shareholders by about 12% but only addresses a small portion of the $1.73 billion in long-term debt the company had as of its most recent earnings report.
Still, it's a step in the right direction, even though investors largely balked at the announcement. At this point, Bed Bath & Beyond has little choice but to dilute shareholders in order to manage its debt burden and its operational cash burn.
Gove also said, "Our entire organization is focused on executing our customer-focused priorities of improved assortment and supply as we enter the peak holiday selling season."
Indeed, the holiday season will be crucial for the retail stock. Unfortunately, fears of a recession seem to be growing, and the home goods sector is still weak after booming during the pandemic, meaning it's likely the company will struggle.
