Macy’s Inc. closed on $4.5 billion of new financing on Monday to fund operations, bring in fresh inventory, cover debt, resolve payables and otherwise enable the department store to weather the pandemic.
The news, which was expected, should nevertheless go over well with industry analysts and investors on Tuesday, when Macy’s reports its first-quarter earnings and holds a conference call.
Macy’s on late Monday afternoon said it closed on its previously announced $1.3 billion of 8.375 percent senior secured notes, as well as on a new $3.15 billion asset-based credit agreement.
In addition, the company said it has amended and substantially reduced the credit commitments of its existing $1.5 billion unsecured credit agreement. The company intends to use the proceeds of the notes offering, along with cash on hand, to repay outstanding borrowings under the existing $1.5 billion unsecured credit agreement.
“We are pleased with the strong demand from new investors in our notes issuance, which allowed us to tighten pricing and increase the size of the offering,” said Jeff Gennette, chairman and chief executive officer of Macy’s Inc. “The high quality of our real estate portfolio positioned us well to execute this offering. Additionally, the continued commitment from our bank group allowed us to more than double the size of our existing revolving credit facility. Together, the notes offering and asset-based credit agreement provide Macy’s Inc. with approximately $4.5 billion of borrowings and commitments, giving us sufficient flexibility and liquidity to navigate our current environment and fund our business for the foreseeable future.”
The senior secured notes mature in June 2025 and are secured by real estate.
The asset-based credit agreement will mature in May 2024 and includes a short-term facility of $300 million that will mature in December 2020. The asset-based credit agreement also contains an accordion feature that will enable the company to request increases in the size of the facility up to an additional aggregate principal amount of $750 million. The new asset-based credit agreement is secured by all assets and common equity of the newly formed Macy’s Inventory Funding LLC, which has purchased the vast majority of the company’s inventory, and which is the borrower under the new asset-based credit agreement.
Macy’s also “substantially amended” its existing $1.5 billion unsecured revolving credit agreement to reduce the available credit commitment and modify the covenants. The amended revolving credit agreement provides the company with unsecured revolving credit of up to $75 million.
The company was advised on the transactions by Lazard, Kirkland & Ellis and Jones Day. Additionally, Eastdil Secured served as the company’s real estate adviser. Credit Suisse and JP Morgan served as joint physical book runners on the company’s senior secured notes issuance. Bank of America and Goldman Sachs served as book runners on the notes issuance. Bank of America is serving as the administrative agent and lead arranger on the company’s asset-based credit agreement.