Macy’s has started refinancing procedures expected to see it through fiscal 2021.
The department store giant, whose business has plunged amid the COVID-19 pandemic, announced the offering of $1.1 billion in secured notes, which mature in 2025. Macy’s said it intends to use the notes, along with cash on hand, to repay the borrowings under its current $1.5 billion credit facility.
The debt will be secured by some of Macy’s real estate assets, including the company’s stores in downtown Brooklyn, Union Square in San Francisco and State Street in Chicago, in addition to 35 mall-based stores and 10 distribution centers. The assets are valued at about $2.2 billion.
In connection with the bond offering, Macy’s is planning to enter into an asset-based credit agreement. Upon closing of the facility, the retailer said it will have approximately $3 billion of revolving credit commitments, including a $300 million revolving bridge credit facility that will mature at the end of the 2020 calendar year. The credit facility, which will be backed by the majority of the retailer’s owned inventory, will mature in 2024.
Once the asset-backed loan is closed, the inventory subsidiary will technically be the entity buying inventory and will then consign it to a newly created operating company, Macy’s Retail Holdings Inc.
“Upon the completion of the bond offering, as well as our entry into the credit facility, we expect to have more than sufficient liquidity to fund our operations and retire upcoming debt maturities in fiscal 2020 and fiscal 2021,” Macy’s stated.