Macy’s Inc. is stepping up share buybacks and other investments after revising its debt structure and paying down some of its debt on the back of strong earnings.
The New York-based department-store chain, which raised $4.5 billion in June 2020 to help fund its strained operations, in the coming weeks expects to refinance $850 million in bonds. It also intends to pay down another $280 million in debt.
The new senior notes, which were offered in two tranches, will mature in 2030 and 2032, leaving Macy’s with no significant maturities—apart from $6 million coming due in 2025—until 2027, when it needs to repay $71 million in debt with a 6.79% interest rate.
Adrian Mitchell, chief financial officer of Macy’s
Photo:
Jeenah Moon/Bloomberg News
The new debt has coupon rates of 5.875% and 6.125%, respectively, which is lower than what Macy’s paid for short-term debt it took out in 2020. Macy’s in August repaid $1.3 billion in secured notes with an 8.375% interest rate, at the time one of the highest rates in its debt portfolio, Chief Financial Officer
Adrian Mitchell
said.
The company on Tuesday removed the collateral on a second-lien loan consisting of several retail stores and distribution centers, a move aimed at freeing real-estate assets from debt, he said.
“We’ve focused on removing those really expensive towers [of debt] that were driven by the Covid pandemic and we put ourselves in a much better position with a much more reasonable rate of return,” said Mr. Mitchell, who has been in the role since November 2020. “The focus can now shift to investing in the growth of the business and building capabilities.”
Macy’s was in danger of running out of cash even before the onset of the coronavirus pandemic, as consumers adjusted their shopping habits, including making fewer visits to malls. The company’s business has recovered in recent quarters, freeing up cash that Macy’s allocated toward paying down some of its debt.
Overall sales climbed 28% to $8.67 billion during the quarter ended Jan. 29, compared with the prior-year period, thanks to stronger consumer spending. Net income rose to $742 million from $160 million a year earlier, Macy’s said.
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The company over the next three years plans to spend $3 billion on capital investments in areas such as its distribution and digital operations, including $1 billion this year. Macy’…….