An American retail giant is crying out for help in these desperate times.
Macy’s (NYSE:M) is taking extreme measures to avoid dire outcomes like bankruptcy, and will try to raise billions in debt to weather the pandemic crisis.
The country’s largest department store is looking at raising as much as $5 billion in debt, the people said. It will seek to use its inventory as collateral to raise $3 billion and real estate to raise $1 billion to $2 billion, sources said, and added, it is not planning to pledge its prime Herald Square location in New York as part of the deal.
The retailer earlier this year retained investment bank Lazard to help shore up its balance sheet.
The people stressed that bankruptcy is not a focus for Macy’s at this time. But the decision to take on billions in debt for the historically financially conservative company is a sign of the pressure it is facing as its stores have been forced shut and revenue has run dry.
Macy’s, which also owns Bluemercury and Bloomingdales, has roughly 775 stores. As of January, it had sales of roughly $25 billion and net debt of $3.5 billion. Its nearest debt maturity is for roughly $530 million in January 2021. Its shares have fallen nearly 70% year-to-date, giving it a market capitalization of $1.6 billion.
The coronavirus pandemic has been a firestorm for retail, forcing the industry to battle large fixed costs and evaporating sales. Macy’s was already seeking to cull costs prior to the pandemic, amid changing shopping habits and an expansive store base. It has said it plans to shut roughly a quarter of its stores over the next three years.
M shares lopped off 12 cents, or 2.3%, to $5.09