By Connor Hart

Beyond expressed concerns about The Container Store's ability to secure a suitable deal with its lenders, casting doubt on its $40 million investment in the retail chain.

The partnership, first announced last month, was set to provide the struggling specialty retail chain offering storage and organization products a financial lifeline while returning some Bed Bath & Beyond products back to physical retail locations. It was also contingent on The Container Store securing new financing on terms commercially acceptable to Beyond.

On Wednesday, Beyond said it has concerns regarding The Container Store's ability to reach an agreement with lenders based on the financing proposals presented thus far.

Beyond, under the agreement, has a right to determine at its sole discretion the adequacy of The Container Store's financing agreements, it said.

"While we continue to believe in The Container Store's brand and business fundamentals, the proposed financing terms we have reviewed to date fall short of what we believe is necessary to complete the transaction," Executive Chairman Marcus Lemonis said.

The Midvale, Utah, company, whose portfolio includes Bed Bath & Beyond, Overstock and Zulily, said it will continue to evaluate financing proposals. Beyond noted that either party may terminate the deal if The Container Store is unable to obtain acceptable financing by Jan. 31.

In the deal, The Container Store would issue about 40,000 shares of its newly-created series of preferred stock to Beyond for an aggregate purchase price of $40 million. Beyond would get space at some of The Container Store's locations to showcase co-branded assortment for kitchen, bath and bedroom.

The partnership came about five months after The Container Store said it was undertaking a strategic review of the business. In August, the company said it would stop providing financial guidance as it evaluated strategic alternatives for the company in the midst of a challenging environment for the general merchandise category.

The Container Store didn't immediately respond to a request for comment.

Beyond has sought to bring back physical Bed Bath & Beyond stores after the company last year filed for, and later emerged from, bankruptcy. Also last month, the company entered a $25 million partnership with Kirkland's in which the home-decor retailer will become the exclusive brick-and-mortar operator of Beyond while the companies work to cut costs and improve inventory management.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

November 20, 2024 18:10 ET (23:10 GMT)

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