Macy’s Gains Amid Push for Cheaper Debt with New Refinance

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Macy’s Gains Amid Push for Cheaper Debt with New Refinance

By Dhirendra Tripathi – Macy's, Inc. (NYSE: M ) stock gained 3% in premarket Wednesday as the retailer pushes to repay debt and refinance the existing one at cheaper interest rates. 

In the latest exercise, the company has refinanced $850 million debt at its 100% subsidiary Macy’s Retail Holdings. The debt was split into equal tranches of $425 million each at coupon rates of 5.875% and 6.125% respectively. This is cheaper than the debt Macy’s took in 2020 and comes in at a time when interest rates are likely to harden.

The new debt, one note maturing in 2030 and the other in 2032, means Macy’s has no significant repayment coming up till 2027 when it repays $71 million carrying an interest rate of 6.79%. It has one note of $6 million due in 2025.  

Macy’s in August repaid $1.3 billion in secured notes with an 8.375% interest rate, one of the highest rates in its debt portfolio at the time, The Wall Street Journal quoted Chief Financial Officer Adrian Mitchell as saying.

Macy’s was close to running out of cash even before the pandemic struck. The business has bounced back in recent quarters, allowing it to repay debt, issue bigger dividends, and do share repurchases.

It closed its fourth quarter ended January 29 with net debt of $1.58 billion, down over 50% from a year earlier, according to Macy’s.

The company last month said it will pay a 5% higher quarterly dividend of 15.75 cents per share. It also announced a new $2 billion share buyback that follows the $500 million repurchases completed in the fourth quarter.

Efforts at pushing sales through digital channels yielded results in the recent quarter. The retailer gained around 7.2 million new customers during the quarter with 58% of them coming through the digital channels.

Margins expanded due to higher pricing of products as well as tighter control on promotion expenses. Net sales rose 28% to $8.7 billion.

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