Bed Bath & Beyond Set for Financial Restructuring - Analyst Blog

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Bed Bath & Beyond Inc. ( BBBY ) recently made several announcements in connection with its financial structure.

Firstly, it priced senior unsecured notes, which it plans to offer, belonging to 3 different series, with the total principal amounting to $1.5 billion.

The first category includes notes worth $300 million, with an annual interest rate of 3.749% whose maturity is due in August 2024. The second set of notes worth $300 million bearing an annual interest rate of 4.915% is due in August 2034. Finally, the last category of notes bearing an annual charge of 5.165% due in August 2044, are worth $900 million.

The note offering is anticipated to close on Jul 17, 2014, subject to various market and business conditions. Bed Bath & Beyond plans to utilize the proceeds from this offering to buy back shares and for other business purposes.

Going by this strategy, the company proposed to enter into an accelerated share buyback program worth $1.1 billion, post the completion of the offering. Looking back, we note that Bed Bath & Beyond has constantly rewarded its shareholders for about a decade.

Most recently, the company proposed its plan to repurchase shares worth $2 billion over the next fiscal year. Bed Bath & Beyond highlighted that it will commence the share repurchases under this new program following the completion of its existing program, which had about $861 million worth of shares left to be bought back as of May 31, 2014. Moreover, the company stated that it expects to complete this new buyback plan by fiscal 2016.

These authorizations are an indication of the board's confidence in the company's long-term growth potential, financial outlook and ability to generate cash flow. Bed Bath & Beyond's strong balance sheet, along with its cash flow generation ability, provides the financial flexibility to undertake shareholder-friendly moves. The company generated cash flow of $186.9 million and had cash and cash equivalents of $536.6 million as of the end of first-quarter fiscal 2014.

Share repurchase programs are frequent among companies with a stable cash position and healthy cash flow. Apart from Bed Bath & Beyond, Nokia Corp. ( NOK ), IMAX Corp. ( IMAX ) and CR Bard Inc. ( BCR ) announced buyback programs in the recent past.

Finally, concurrent with this announcement, the company declared that it entered into an unsecured senior revolving credit facility worth $250 million, scheduled to expire in 2019. The company currently carries a Zacks Rank #3 (Hold).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BBBY , BCR , NOK , IMAX

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