Re: Macy's (NYSE:M) announces a new $1.1B senior note offering due in 2025.
26 May 2020
New York, May 26, 2020 -- Moody's Investors Service, ("Moody's") downgraded Macy's, Inc.'s ("Macy's") corporate family rating to Ba3 from Ba1. At the same time its probability of default rating was downgraded to Ba3-PD from Ba1-PD. The senior unsecured ratings at Macy's Inc., Macy's Retail Holdings, Inc. and May Department Stores Company (The) were also downgraded to B1 from Ba1. The Macy's Retail Holdings, Inc. commercial paper rating was affirmed at NP. The speculative grade liquidity rating remains SGL-2 and the outlook remains negative.
Moody's also assigned a Ba1 rating to its proposed Macy's, Inc. $1.1 billion senior secured notes. The new notes will be secured by certain real estate which include its San Francisco, Chicago, and Brooklyn urban iconic locations, 35 mall assets, and 10 distribution centers. The use of net proceeds will be to repay its revolving credit facility. The company is also amending its $1.5 billion unsecured revolving credit facility (not rated) and in process to replace it with an approximately $3 billion ABL secured by inventory (not rated).
"Although the proposed transaction will enable Macy's to maintain good liquidity as its navigates the disruption from COVID-19 and ongoing weakness in consumer demand, it will reduce Macy's unencumbered asset base", said Christina Boni, Vice President. "The two notch downgrade acknowledges the additional debt incurred, and resulting higher leverage, to navigate this unprecedented period combined with a lower unencumbered asset base and the expectation that the recovery will be protracted", Boni added.