by Michael Keenan, Edge City Design
As if closing stores, laying off workers and incurring mounting debt amid the coronavirus pandemic wasn’t bad enough, now retailers face another obstacle.
Two of the largest providers of retail credit insurance, Coface SA and Euler Hermes Group SAS, have stopped writing policies covering Macy’s and other big stores, our sources have told us.
Without such coverage, rebounding post-COVID-19 will be more challenging, as suppliers will want faster payments, which could result in fewer product deliveries.
Our sources have found that credit insurers have been reluctant to offer new policies for stores as they monitor the markets.
Macy’s has about $2.2 billion in liquid assets, which could carry them through the year.
Last week, PYMNTS reported that Macy’s will try to raise as much as $5 billion in debt to weather the pandemic crisis. They will try to use its inventory as collateral to raise $3 billion and its real estate holdings to attract up to $2 billion.
Analysts said the decision to take on billions in debt is a sign that the fiscally conservative company’s revenues have run dry.
“As we have previously communicated, the coronavirus pandemic continues to take a toll on Macy’s business,” Macy’s told us. “Macy’s has taken multiple actions to improve our position and improve financial flexibility, including suspending our quarterly dividend, deferring capital spend, drawing on our credit facility, reducing pay at most levels of management and furloughing the majority of our colleagues … the company is also exploring numerous options to strengthen our capital structure.”
In its most recent filing in January, Macy’s had sales of roughly $25 billion and net debt of $3.5 billion. Its nearest debt maturity was for roughly $530 million in January 2021. Its shares have fallen nearly 70 percent year to date, giving it a market capitalization of $1.6 billion.
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