Macy’s Calls on Lazard to Strengthen Finances as Coronavirus Reduces Sales, Sources

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A prohibited walking sign stands in front of a closed Macy’s Inc. store in Arlington, Virginia, United States, Tuesday March 31, 2020.

Andrew Harrer | Bloomberg | Getty Images

Macy’s has hired investment bank Lazard to explore options to strengthen its finances after the department store operator lost most of his income by closing all of his stores in the aftermath of the coronavirus epidemic, said people close to the case.

The decision by Macy’s, the largest department store operator in the United States in terms of sales, is a sign of the seriousness of the crisis facing brick and mortar retailers, who were already struggling with the passage online shopping. The pandemic has forced store closings and mass departures of employees while state after state has issued shelter orders on the ground to contain the spread of the coronavirus, which causes COVID- respiratory disease. 19.

Macy’s called on Lazard bankers who specialize in finding ways to recapitalize companies in financial difficulty and rework debt, the sources said. Macy’s has also recruited debt restructuring lawyers at Kirkland & Ellis LLP, two of the sources said.

Macy’s asked his advisers to help him manage his liabilities and explore options that might include new financing, the sources said, adding that no debt restructuring was imminent.

The sources asked not to be identified because the deliberations are confidential.

A spokesperson for Macy’s said in a statement that the company “is exploring many options to strengthen our capital structure,” adding that it maintains relationships with a range of advisers.

The company, which operates department stores Macy’s and Bloomingdale’s, declined to comment beyond previous tips it had taken in response to the pandemic, including the suspension of its quarterly dividend, the withdrawal of its line of credit, the deferral of expenses, reduction of wages to maximum management levels and permission of the majority of its approximately 123,000 employees.

A spokesperson for Kirkland did not immediately respond to a request for comment. A Lazard spokesperson declined to comment.

The company, which also operates the bluemercury beauty and spa chain, has $ 3.6 billion in long-term debt and about $ 7 billion in store lease obligations. It had $ 685 million in cash at the end of its last fiscal year and recently pulled an additional $ 1.5 billion from a line of credit while its stores remained closed.

Macy’s decision to explore new financing, among other options, makes it the last American retailer to do so. On Thursday, rival Nordstrom raised $ 600 million by placing real estate assets that included five stores, six distribution centers and its Seattle headquarters in a separate company and borrowing against it by issuing bonds.

Macy’s was already cutting costs before the coronavirus outbreak, with plans to permanently close 125 stores over the next three years and cut more than 2,000 jobs. These are in addition to the more than 100 store closings and thousands of job cuts it has deployed since 2015.

The 161-year-old department store operator closed all 775 department stores last month in response to the pandemic. This has made his e-commerce operations his only source of income; E-commerce accounted for about 25% of its roughly $ 25 billion in sales in the 12 months ending February 1.

It is not known 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 expects Macy’s revenues to plunge by nearly 25% this year. Shares of the Cincinnati, Ohio-based company have fallen more than 60% since the start of this year, giving the retailer a market capitalization of around $ 2 billion.

Debt due

Like many companies hard hit by the pandemic, Macy’s said its chief executive, Jeff Gennette, would give up paying during the crisis. Last week, Macy’s announced that its chief financial officer had decided to resign in late May and that he was looking for a replacement.

Macy’s has become an American household name over the decades, known for its Thanksgiving Day parade in New York and its flagship store Herald Square, which spans one block in the heart of Manhattan.

Macy’s has $ 530 million in debt owed in January 2021 and an additional $ 450 million in early 2022, and likely has enough cash to make these payments, said Fitch.

The company’s credit rating has been downgraded to decay by two rating companies in the past few weeks, costing the borrower more. However, Macy’s unwanted rated bonds rebounded last week after the Federal Reserve announced that it would extend its asset purchase program to corporate bonds that had been higher quality but were then downgraded. to undesirable status.

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