Macy’s amends covenants to credit facility to boost credit protection
December 17, 2008,
Cincinnati – Macys Inc. is amending its existing bank credit agreement to update the financial covenants toward what it called “a more market-based approach.”
The size and maturity date of Macy’s credit facility with Bank of America and J.P. Morgan remain unchanged, at $2 billion and Aug. 31, 2012.
“Macy’s is managing its capital structure and credit facilities in a prudent and conservative manner,” said Terry Lundgren, Macy’s, Inc. chairman, president and ceo. “Especially given our strong cash flow and healthy balance sheet, this action should remove any question about the financial strength of Macy’s, Inc., including our ability to retire $950 million in debt that is maturing in 2009.”
Under the amended terms, one leverage covenant moves from debt-to-capitalization to debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization), which Macy’s said “eliminates from the calculation any potential future non-cash goodwill or asset impairment charges.”
Also, the interest coverage ratio was reduced to 3.0 times from the current 3.25 times through Oct. 30, 2010, when it then reverts to 3.25.
Macy’s noted that it has no current borrowings against this credit agreement, and the 2008 fall season peak borrowing needs (now fully repaid) were $163 million, compared to approximately $1 billion last year.