Bed Bath & Beyond was downgraded to CC from CCC by S&P following its announcement of an exchange offer for its outstanding senior unsecured notes. The details of the proposed exchange are as follows:
Swap its $295mn 3.749% bonds due August 2024 for either:
A new non-convertible second-lien note due 2027 which will be redeemable in one year at 40% of principal
Or a new convertible second-lien note valued at $410 per $1,000 of principal
Swap its $225mn 4.915% 2034s and $675mn 5.165% 2044s for a new third-lien note due 2029 valued at $217.50 per $1,000 of principal
The rating agency views the proposal as a distressed debt exchange and tantamount to default, given that the new bonds are valued at a significant discount to par value. S&P continues to maintain a negative outlook on the retailer, with an expectation of further lowering its issuer rating once the exchange transactions are completed.
Despite the downgrade, its 3.749% 2024s were trading 1 point higher at 30.5 cents on the dollar.