Macy’s will reportedly try to raise as much as $5 billion in debt to survive the COVID-19 pandemic, people familiar with the matter told CNBC. The plan would call for using inventory as collateral to raise $3 billion, while real estate holdings would cover another $1 billion to $2 billion.
The people told CNBC that bankruptcy is not currently a focus for Macy’s efforts. Additionally, the company is not planning to pledge its Herald Square flagship store in New York city as part of the deal.
A Macy’s spokesperson confirmed that “the company is also exploring numerous options to strengthen our capital structure” in a statement sent to CNBC, but did not specify what the options would be.
Like many retailers, Macy’s has been put in a difficult position by social distancing and related store closures: the retailer has been forced to furlough approximately 130,000 employees after it lost a majority of its sales to store closures. Macy’s also was dropped from the S&P 500 Index after its share value plunged more than 70% between the start of 2020 and April 1.
Even if Macy’s survives the current crisis, it will be in poor condition once operations return to normal: the retailer has $530 million in debt due in January 2021, and the retailer was planning on shutting about a quarter of its stores over the next three years.