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Is Bed Bath & Beyond Backed Into a Corner?

Debt exchange or default? Moody’s and Bed Bath & Beyond have different ways of describing the retailer’s financial straits.

Bed Bath & Beyond Inc.

The struggling home retailer on Tuesday said it’s giving lenders the option to exchange certain Senior Notes for new ones, according to a Securities & Exchange Commission filing. Bondholders reportedly had already taken action earlier this month to protect their investments in the troubled home goods retailer.

Companies opt for a debt exchange when they can’t pay their obligations and instead try to renegotiate the terms with their creditors. However, credit ratings firms such as Moody’s usually consider this phenomenon an “event of default,” a potentially ominous sign for the challenged chain.

“We believe this transaction will put us in a stronger financial position going forward by significantly reducing our debt and interest expense upon a successful completion,” Bed Bath & Beyond interim CEO Sue Gove said. “By proactively focusing on our Senior Notes, we also intend to address the maturity of our nearest-term 2024 Notes and any impact they may have on our current and future business.”

BBBY is offering to exchange its 3.749 percent Senior Notes due 2024 for new 3.693 percent senior second lien secured non-convertible notes due 2027 and/or new 8.821 percent senior second lien secured convertible notes due 2027, at the option of the note holder. Other offers include swapping 4.915 percent senior notes due 2023 for new 12.0 percent senior third lien secured convertible notes due 2029 and 5.165 percent senior notes due 2044 for the new third lien secured convertible notes due 2029.

“This transaction is intended to create greater stability and flexibility in our business which we believe benefits all stakeholders,” Gove said.

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While maturities have been extended in some cases or the rate of interest increased, all three proposed swaps contain a common denominator. Note holders who agree to the swap are exchanging for new notes backed by the retailer’s valuable assets. If the retailer fails, those holding secured debt will get something from a bankruptcy. But with its best assets now spoken for, does Bed Bath & Beyond have anything left to bargain with if it needs even more financing?

The home goods retailer is trying to right the ship, but a lackluster holiday and Q4 might force it into bankruptcy sooner rather than later. The Union, N.J. company recently reported another quarter of double-digit sales losses. Gove and her team are trying to freshen up merchandising but those changes might not trickle down to store shelves for another quarter or two. Which begs the question: will the clock expire before Bed Bath & Beyond makes good on its turnaround?

Lenders have until the end of Nov. 15 to participate in the debt exchange.

Tanger Factory Outlet Centers Inc.

Meanwhile, a shopping center operator is making financial moves of its own.

Tanger Properties Limited Partnership has an amended $300 million unsecured term loan. The amended facility increases its total capacity to $325 million, with an extended maturity through January 2027 including a one-year extension option. The new facility also has better financing terms on the rate of interest, and it includes a sustainability metric that can reduce the interest rate by one basis point annually if certain thresholds are met.

“This amendment improves our liquidity, leaves no unsecured debt maturities until 2026, and further strengthens Tanger’s balance sheet as part of our commitment to deliver long-term growth for shareholders,” Stephen Yalof, president and CEO of the open-air center operator, said.

In addition, Tanger said it recently refinanced secured mortgages at its properties in Columbus, Ohio, Memphis, and Southaven, Miss., extending the maturity dates to October 2032 and October 2026, respectively. The new mortgages each also include the option of a one-year extension.