Macy’s Brings $500 Million Debt Sale Amid Hot Junk Market

(Bloomberg) -- Macy's Inc. is tapping the junk-bond market to capitalize on record-low borrowing costs after reporting better-than-expected holiday sales and predicting that pandemic pressures will ease later this year.

The department store chain is selling $500 million of senior notes due 2029 to help fund a tender offer of the same amount, according to separate statements Tuesday. It's looking to buy back notes due in the next four years with coupons between 2.875% and 7.6%.

The bond deal launched at a coupon of 5.875% after initial price discussions ranged between a low-to-mid 6% yield, according to people with knowledge of the matter, who asked not to be identified discussing a private transaction.

Representatives for Macy's and Credit Suisse Group AG, which is leading the bond sale, declined to comment.

Troubled companies have been engineering reprieves for themselves by taking advantage of historically cheap funding costs in high-yield markets. Party City Holdco Inc. and Carnival Corp. have raised cash with junk bond sales over the past few weeks. Bloomberg reported in February that Macy's was sounding out investors on a potential debt sale that would further aid the retailer through the pandemic.

Read More: Macy's Reinstates Guidance, Beats on Sales

Macy's shares and bonds plunged last year as the pandemic took hold in the U.S. and it was forced to temporarily close stores. Government stimulus measures and gradual re-openings helped the company's debt rally from distressed levels, and many of the securities now trade near or above par.

Macy's, which also owns Bloomingdale's and BlueMercury, reported all three of its brands exceeded expectations in the holiday quarter. It predicted 2021 will be a “recovery and rebuilding year,” according to a statement, “with momentum building in the back half.”

The new issue may be sold as soon as Tuesday, one of the people said. JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. are also managing the offering.

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