This case introduces Bed Bath & Beyond interim CFO Holly Etlin as she seeks to avoid a bankruptcy move for the retailer in early 2023. The company had just endured a difficult holiday shopping period that drained its cash and forced management to default on several credit and debt agreements. Those defaults triggered a grace period before a looming bankruptcy filing – barring a significant cash infusion. In this dramatic moment, Etlin and her team were approached by Hudson Bay Capital, which offered a financial bailout through a complex package of convertible preferred stock, common stock warrants, and additional warrants to purchase more preferred stock. This case has been successfully taught at the University of Virginia Darden School of Business in “Corporate Financing,” a second-year elective of the MBA program. It facilitates the evaluation of several types of complicated financing options under the umbrella of floating rate debt securities. It highlights practical aspects of the Black-Scholes model for students to consider when valuing derivative financial instruments.
