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NEW YORK (Reuters) – Macy’s Inc (MINNESOTA) has hired investment bank Lazard Ltd (LAZ.N) to explore options to strengthen their finances after the department store operator lost most of its revenue by closing all of its stores as a result of the coronavirus outbreak, people familiar with the matter said.
FILE PHOTO: People wait to enter Macy’s Herald Square before the anticipated opening of Black Friday sales in Manhattan, New York, USA. USA, November 28, 2019. REUTERS / Andrew Kelly
The decision by Macy’s, the largest US department store operator. USA By sales, it is a sign of the severity of the crisis facing traditional retailers, who were already struggling with the move to online shopping. The pandemic has forced stores to close, and widespread employee leave as state-by-state issued shelter-in-place orders in an effort to stem the spread of the coronavirus, which causes COVID-19 respiratory illness.
Macy’s has called in Lazard bankers who specialize in finding ways to recapitalize financially troubled companies and re-draw debt, the sources said. Macy’s has also hired debt restructuring attorneys at Kirkland & Ellis LLP, two of the sources said.
Macy has asked her advisers to help manage her liabilities and explore options that could include new financing, the sources said, adding that debt restructuring is not imminent.
The sources asked not to be identified because the deliberations are confidential.
A Macy’s spokeswoman said in a statement that the company is “exploring numerous options to strengthen our capital structure,” adding that it maintains relationships with a variety of advisers.
The company, which operates Macy’s and Bloomingdale’s department stores, declined to comment beyond pointing out previous steps it has taken in response to the pandemic, including suspending its quarterly dividend, reducing its line of credit, deferring expenses, reducing payment. at most management and licensing levels of the majority of its approximately 123,000 employees.
A Kirkland spokeswoman did not immediately respond to a request for comment. A Lazard spokeswoman declined to comment.
The company, which also operates bluemercury beauty products and the spa chain, has long-term debt of $ 3.6 billion and approximately $ 7 billion in store lease obligations. He had $ 685 million in cash at the end of his most recent fiscal year, and recently withdrew another $ 1.5 billion from a line of credit while his stores remained closed.
Macy’s decision to explore new financing, among other options, makes him the last retailer in the US. USA In doing it. On Thursday, rival Nordstrom Inc (JWN.N) Raised $ 600 million by placing real estate assets that included five stores, six distribution centers, and their Seattle headquarters in a separate company and borrowed against them through bond issuance.
Macy was already in the midst of cutting costs before the coronavirus outbreak, with plans to permanently close 125 stores in the next three years and cut more than 2,000 jobs. In addition to the more than 100 store closings and thousands of job cuts that have been implemented since 2015.
The 161-year-old department store operator closed all of its 775 department stores last month in response to the pandemic. That made their e-commerce operations their only source of income; E-commerce accounted for about 25% of its approximately $ 25 billion in sales in the 12 months ending February 1.
It is unclear when Macy’s and other department store chains will be able to reopen their stores. Credit rating firm Fitch Ratings Inc said earlier this month that it expected Macy’s revenue to drop nearly 25% this year. Shares of the New York-based company have fallen more than 60% since the beginning of this year, giving the retailer a market capitalization of approximately $ 2 billion.
DEBT DUE
Like many companies affected by the pandemic, Macy’s has said its chief executive officer, Jeff Gennette, will forgo payment during the crisis. Last week, Macy’s announced that its chief financial officer had decided to resign in late May and was looking for a replacement.
Macy’s became a US household name. USA Over the decades, known for its New York City Thanksgiving Day Parade and its Herald Square flagship store, which spans an entire block in the heart of Manhattan.
Macy has $ 530 million debt maturing in January 2021 and another $ 450 million in early 2022, and she probably has enough cash to make those payments, Fitch said.
The company’s credit rating has been downgraded to trash by two rating firms in recent weeks, making it more expensive for the retailer to borrow. However, Macy’s junk-rated bonds recovered last week after the Federal Reserve said it would expand its asset purchase program to bonds from companies that had been investment grade but later turned into junk.
(This story has been filled in to correct headquarters in New York, not Cincinnati in the fifth to last paragraph)
Reports by Jessica DiNapoli and Mike Spector; Editing by Leslie Adler
