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Macy’s Borrows $4.5B, Backed by Its Real Estate Portfolio

By Rhian Hunt – Jun 9, 2020 at 8:35AM

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The retailer’s share price spiked more than 14% on the news.

Investors are bullish on Macy's, Inc. (M 4.01%) after the apparel, housewares, and accessories giant revealed the unexpected strength of its credit position yesterday in a press release. The $1.3 billion in senior secured notes, or bonds, that it closed on have been known to investors for some time. However, Macy's also unveiled an additional $3.15 billion credit agreement, which is asset-based. 

CEO Jeff Gennette remarked: "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." The company plans to use part of the cash it just gained to pay back a $1.5 billion revolving credit facility, freeing itself of debts that need to be repaid in 2020 or 2021.

Exterior of a Macy's in Atlanta.

Image source: Macy's, Inc.

The retailer will also have plenty of money on hand to fund other facets of its business, such as stocking fresh inventory for summer and fall shopping. Around $300 million of the new debt will mature in December this year, with the rest maturing in 2024.

Macy's saw serious losses of sales and revenue because of COVID-19 related store closures, but has been reopening its stores as local health measures permit. In mid-May, it also attracted a major investment from billionaire Daniel Kretinsky, who purchased 15.5 million shares of Macy's stock, giving him a 5% stake in the retailer.

At stock market close Monday, Macy's shares had been bid up 8.89%, reaching $9.55 per share. Vigorous after-hours trading rocketed the stock even higher, reaching more than $10.75 and rising 14% from the market closing price.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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