By Geoffrey Smith
Investing.com -- Bed Bath & Beyond (NASDAQ:BBBY) stock plummeted in premarket trading after the struggling retailer priced an issue of preferred stock and warrants intended to help it exit the Chapter 11 bankruptcy process.
By 08:50 ET (13:50), the stock was down 37% at $3.64, fully unwinding the spike seen in late trading on Monday as speculation on the pricing mounted.
The pricing highlighted the extent of the dilution faced by existing shareholders as efforts to restructure its debts and recapitalize the company continue.
Bed Bath & Beyond said it expects to raise around $225 million through an offering of convertible preferred stock, and another $800M through the sale of warrants obliging buyers to buy more preferred stock in the future "assuming certain conditions are met."
The company said it "cannot give any assurances that it will receive all of the installment proceeds of the offering."
The offering consists of three parts: 23,685 shares of Series A Convertible Preferred Stock; warrants to buy 84,216 shares of Series A Convertible Preferred Stock; and warrants to buy 95.4 million shares of the company's common stock.
Bed Bath & Beyond said it will use the net proceeds - along with $100M from a recently revised debt facility - to repay outstanding revolving loans under its asset-backed lending facility and meet missed interest payments. Anything left after that can be used for general corporate purposes, including the rebuilding of the company's inventory. Various suppliers had stopped business with the chain ahead of its bankruptcy filing due to unpaid debts.