Bed Bath & Beyond Inc is making a last-ditch effort to avoid bankruptcy by turning to the public markets for new cash. The retailer, which has been preparing for a Chapter 11 bankruptcy filing, will issue convertible preferred securities and warrants, it said in a statement Monday. The company plans to raise more than $1 billion from the offerings.

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It will use proceeds from the sale, along with a draw on a credit line, to repay debt due under its asset-based loan, according to the statement. It will also make overdue interest payments on some of its debt.

A Bed Bath & Beyond spokeswoman didn’t respond to a request for comment. In the statement, the company said it “cannot give any assurances that it will receive any or all of the proceeds” of the sales.

A failure to complete the securities offering, the company added, will “likely force it to file for bankruptcy protection.”

Bed Bath & Beyond has publicly warned of its solvency challenges and said it is considering bankruptcy. It defaulted on a credit line and skipped interest payments on some of its debts, entering a 30-day grace period. Recently, it has been struggling to find interested buyers to help it finance and ultimately emerge from bankruptcy, Bloomberg News reported.

Even as its options seemed to narrow, the company’s stock has staged a volatile rebound from decade lows over the past week. Its share price surged 92 percent Monday to close at $5.86 before the announcement, and then fell in the immediate aftermarket.

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The company also named as its interim chief financial officer Holly Etlin, a partner and managing director at the consulting firm AlixPartners. AlixPartners is one of several firms that has been working with Bed Bath & Beyond to trim costs and attempt a business turnaround.

Merchandise Problems

Convertible preferred stocks typically pay dividends and give holders the option to convert their equity into common shares. The offering is often popular among cash-strapped firms seeking ways to raise capital.

“Many investors are likely to be deterred by the incredibly weak balance sheet, the mountain of debt, and a business that remains fundamentally broken,” GlobalData Plc analyst Neil Saunders wrote in a research note. “They will see this as throwing good money after bad. However, there may be some – in the form of the less rational meme stock crowd – who will take the bait.”

The home goods retailer said it also planned to use some of the proceeds of the share sale to rebuild its merchandise. But it’s an uphill battle. Even with any cash infusion, it’s not certain the company will be able to stave off its demise and the new funds could end up simply extending its long decline.

Company executives have said during the past two earnings calls that when they have had enough merchandise on hand, sales have improved - a sign, they said, that there is still consumer demand for Bed Bath & Beyond’s products.

But even if the firm is able to raise enough cash on the public markets to pay some suppliers, many shoppers have already given up on the home goods chain and it will be hard to win them back, suppliers and analysts say. And it can be costly to improve tired-looking stores and to invest in marketing to let shoppers know if stores become well-stocked again. Meanwhile, suppliers are likely to remain wary of shipping their products to the ailing retailer.

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(Edited by : Asmita Pant)