Shares in Macy’s, Inc. (M) spiked 15% in Monday’s after-hours trading after the company announced the closing on approximately $4.5 billion of new financing.
This included its previously announced $1.3 billion of 8.375% senior secured notes, as well as a new $3.15 billion asset-based credit agreement.
In addition, the company has amended and substantially reduced the credit commitments of its existing $1.5 billion unsecured credit agreement. Macy’s intends to use the proceeds of the notes offering, along with cash on hand, to repay the outstanding borrowings under the existing $1.5 billion unsecured credit agreement.
With the closing of these financings, M now expects to have sufficient liquidity to address the needs of the business, including funding operations and the purchase of new inventory for upcoming seasons, resolving its accrued payables obligations, and repaying upcoming debt maturities in fiscal 2020 and fiscal 2021.
“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, CEO of Macy’s.
“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 CEO added.
Shares in Macy’s have plunged 44% year-to-date, and analysts have a bearish Moderate Sell consensus on the stock with 3 recent hold ratings and 7 sell ratings. The average analyst price target of $5 also indicates 49% further downside potential from current levels. (See M stock analysis on TipRanks).
“We remain Neutral-rated as we continue to favor Kohl’s (KSS) in the department store space, and we expect a highly promotional environment and M’s on-mall presence to weigh on results going forward” wrote Guggenheim analyst Robert Drbul on May 21.
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