David Simpson 🏴‍☠️ Profile picture
Apr 24, 2023 18 tweets 7 min read Read on X
The Day After Bankruptcy, La Fin:

On Mar 30th, Bed Bath files $300m ATM offering to be completed Apr 26th or face bankruptcy. The funds would close the ABL w JP Morgan 3 years before maturity. Any acquisition requires JPM approval, except in chapter 11 proceedings. #BBBY
The $300m ATM offering Mar 30th states,

"Upon filing our annual report Form 10-K, which is due by April 26th, 2023, we will lose S-3 eligibility and therefore we expect all sales made pursuant to the sales agreement will cease by April 26th, 2023... Image
…If we do not receive the proceeds from the offering of securities covered by this prospectus supplement, we expect that we will likely file for bankruptcy protection."
The company enters into a waiver and amendment to the Credit Agreement w JP Morgan on Mar 30th, telling us, "the total revolving commitment was decreased from $565 million to $300 million,"

indicating this ATM would effectively close the ABL revolving commitments from JP Morgan. Image
From the company's S-1 filing,

"We are required to use the net proceeds from sales of our common stock to BRPC II to repay outstanding revolving loans under the ABL facility." Image
"In the event that we fail to obtain all of the anticipated proceeds under the ATM Agreement and therefore fail to meet the requirement of the Amended Credit Agreement, we expect that we will likely file for bankruptcy protection."
Note: "The ABL Facility and FILO Facility mature on August 9, 2026 and August 31, 2027 respectively, unless required to mature earlier pursuant to the terms of the Amendment."

Why is Bed Bath required to close a loan more than 3 years before maturity? Genuine question. Image
And so we conclude this Bed Bath & Beyond daily series with the same question we first started: What is JP Morgan Chase Doing?

It appears JP Morgan is responsible for the company's active dilution in April and eventual voluntary bankruptcy proceedings.
They certainly didn't require an ATM offering in January when the company ~actually~ defaulted. What exactly changed since then?
Disclaimer: I am an Architect with no experience in corporate transactions or finance. My interpretations may be wildly incorrect. My research is not peer-reviewed. This investment involves significant risk and I hold a position because I have an enormous risk tolerance. 🏴‍☠️ Image
An easy study of the company's shares available proves quickly proves the ATM offering is unfeasible, as the $$ proceeds will not reach $300m in funds necessary,

311m new shares (739m on 4/24 vs. 428m on 3/27) x $0.40 (avg. stock price) = $125 million proceeds
To overcome this, Bed Bath can perform a R/S to increase the stock price and available shares to sell, albeit, at incredible dilution to shareholders.

Notably, Bed Bath first filed for a R/S on Mar 17th, 2 weeks even before the ATM offering, record date for voting was Mar 27th. ImageImage
However, the company chooses to schedule a vote for May 9th, weeks after an Apr 26th deadline to complete the $300m ATM offering.

This suggests Bed Bath was unserious about conducting a R/S vote and completing the ATM offering. Predictably, the company then announces Chapter 11. ImageImage
Published in Business Credit (June, 2013),

"Very often buyers interested in purchasing distressed companies or assets prefer to do so in the Chapter 11 context, since Chapter 11 transactions can bind dissatisfied creditors who do not expressly consent to the transaction." Image
It's possible JP Morgan did not give permission for a buyout transaction and Chapter 11 proceedings are necessary to circumvent their approval.

The ABL agreement from Aug 2021 has Negative Covenants requiring permissions from JP Morgan.
Source: bedbathandbeyond.gcs-web.com/node/15201/htm… ImageImage
Which brings me to my most likely conclusion.

Bed Bath & Beyond entered chapter 11 fully prepared for acquisition. The company now belongs to those who hold its debt, of which I expect @Carl_C_Icahn to soon reveal himself as the significant owner of the company's bonds.
This investment has always been buyout or bust, but the evidence of a buyout has been mounting to date, from the executive hires, debt exchange offering, financial consultants, and securities offerings, all the way to FTC concessions and circumventing JPM approval.
I have certainly enjoyed this crash course in corporate finance and transactions but like the rest of you, I'm ready for this final chapter to unfold. It's time to finish this damn book.

Best of luck this week to all the Corporate Raiders out there. #BBBY

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More from @pirateportfo

Aug 9, 2023
April 4th, 2023: "What is JP Morgan Chase Doing?"

This thread covers the company's default on Jan 13th with context from their credit agreements with JP Morgan, including a Jan 13th Pitchbook input of a leveraged buy-out of Bed Bath & Beyond.
April 5th, 2023: "Why Would Perella Weinberg Advise Bondholders to Exchange for Equity?"

This thread covers the company's debt-to-equity exchange deals in Nov2022, including a bankruptcy waterfall analysis and relevant experience from Perella Weinberg.
April 6th, 2023: "Why Didn't Bondholders Accept the Debt Exchange?"

This thread covers the company's cancelled debt exchange offering, questioning bondholders incentives to hold Unsecured Notes over Second/Third Lien Notes during Going-Concern operations.
Read 19 tweets
Jun 7, 2023
WSJ reporter @GunjanJS writes, "When #BBBY filed for bankruptcy, it had a gaping hole in its financials: assets of $4.4b and liabilities of $5.2b," but are these numbers currently accurate?

This post looks into two strategies which create net-positive value for shareholders. Image
To begin, these figures were reported in FY22 Q3 earnings for the period ending Nov 26th. Much has changed in the six+ months since.

These figures will not include $360m in equity capital from the Feb securities offering, nor the assuredly negative cash flow from operations. ImageImage
The first category to address is the company's net operating losses (NOLs).

From bankruptcy docket #10 filed on Apr 23rd, "As of the end of February 25, 2023, the Debtors estimate they had NOLs in the amount of approximately $1.6 billion..." Image
Read 22 tweets
May 8, 2023
From the introduction to the book ‘King Icahn’ by Mark Stevens,

“Icahn had built a position in a company, then traded over-the-counter, to the point that he owned a substantial block of the outstanding stock.” #BBBY ImageImage
“Convinced that he had made a forceful case for reconfiguring the business, Icahn paced like an expectant father, waiting for what he hoped would be a favorable response to his plan.”

“Investment banker: ‘You know, Carl, they don't like you at all.’”
“‘I don't want to threaten you but we are going to begin by smearing your name. We've got three PR firms. We've got the best three PR firms in New York. Starting tomorrow, we are going to start smearing your name...”
Read 6 tweets
May 2, 2023
Debt is the New Equity: A look into Sponsored Buyouts in Chapter 11 and recent events surrounding Bed Bath & Beyond including volume in the company's bonds and the appointment of Holly Etlin to Chief Restructuring Officer. #BBBY Image
This six page Kirkland and Ellis paper (2009) details Sponsored Buyouts and the Plan Sponsor Transaction through Chapter 11 bankruptcy proceedings. The following quotes will summarize the paper, but it's worth a full read.

Source: kirkland.com/-/media/public… ImageImageImageImage
ImageImage
Read 19 tweets
Apr 21, 2023
5 Days to Bankruptcy: Cohen argues a multi-billion $$ valuation of BABY as the Ultimate Destination for Babies. He sells his Bed Bath position in Aug at the start of M&A negotiations. His letter suggests his willingness to hold the board accountable. #BBBY
"Given that BABY is estimated to reach $1.5 billion in sales in Fiscal Year 2023 with a double-digit growth profile and at least 50% digital penetration, we believe it is likely much more valuable than the Company's entire market capitalization today."
($1.6b at time of writing) Image
"We believe under the right circumstances, BABY could be valued on a revenue multiple, like other ecommerce-focused retailers, and justify a valuation of several billion dollars."

The math presented in the following tweet assumes 550m shares outstanding at Bed Bath.
Read 13 tweets
Apr 17, 2023
9 Days to Bankruptcy: Jake Freeman announces ownership of 2024 notes and 6.21% equity stake in Bed Bath & Beyond on July 21st, proposing a bond issuance to raise cash while opposing a sale of the company or a significant amount its assets. #BBBY
"Freeman Capital advocates for a debt realignment that does not change or affect the control. BBBY's effective realignment is a top priority for Freeman Capital and is made in the context of a disinterested shareholder-" Image
"Freeman Capital does not advocate for a sale of BBBY to another company, Freeman Capital does not advocate for the sale of a significant amount of the issuer's assets, Freeman Capital does not advocate for the restructuring of the issuer..."
Read 14 tweets

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