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Item 1.01.
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Entry into a Material Definitive Agreement.
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Issuance of Notes
On June 8, 2020, Macy’s, Inc. (the
“Company”) issued $1.3 billion in aggregate principal amount of 8.375% Senior Secured Notes due 2025 (the “Notes”)
in a private offering at an offering price of 100% of the principal amount thereof. The Notes were offered to persons reasonably
believed to be qualified institutional buyers in an offering exempt from registration in reliance on Rule 144A under the Securities
Act of 1933, as amended (the “Securities Act”), and outside the United States in reliance on Regulation S under the
Securities Act.
The Notes were issued pursuant to an indenture,
dated as of June 8, 2020 (the “Indenture”), among the Company, the guarantors party thereto and U.S. Bank National
Association, as trustee and collateral trustee. The Notes are senior secured obligations of the Company and are or will be secured
on a first-priority basis by (i) a first mortgage/deed of trust in certain real property of subsidiaries of the Company that has
been transferred to subsidiaries of Macy’s Propco Holdings, LLC, a newly created direct, wholly-owned subsidiary of the Company
(“Propco”), and (ii) a pledge by Propco of the equity interests in its subsidiaries that own such transferred real
property. The Notes are, jointly and severally, unconditionally guaranteed on a secured basis by Propco and its subsidiaries (collectively,
the “Secured Guarantors”) and unconditionally guaranteed on an unsecured basis by Macy’s Retail Holdings, LLC,
a direct, wholly-owned subsidiary of the Company (together with the Secured Guarantors, the “Guarantors”).
The Notes bear interest at the rate of
8.375% per annum, which accrues from June 8, 2020 and is payable in arrears on June 15 and December 15 of each year, commencing
on December 15, 2020. The Notes mature on June 15, 2025, unless earlier redeemed or repurchased, and are subject to the terms
and conditions set forth in the Indenture.
The Company may redeem some or all of the
Notes at the redemption prices and on the terms specified in the Indenture. If the Company experiences specific kinds of changes
in control or if Propco or any of its subsidiaries sells certain of its assets, then the Company must offer to repurchase the Notes
on the terms set forth in the Indenture.
The Indenture contains certain covenants
that, among other things, limit the ability of (i) certain of the Company’s subsidiaries to guarantee additional indebtedness,
(ii) the Company to pay distributions on, redeem or repurchase capital stock, (iii) Propco and its subsidiaries to pay distributions
on, redeem or repurchase capital stock, make certain investments, engage in certain transactions with affiliates, consummate certain
sales of assets and stock and incur or suffer to exist liens securing indebtedness and (iv) the Company and the Guarantors to effect
a consolidation or merger, or convey, transfer or lease all or substantially all assets. The Indenture contains events of default
customary for agreements of its type (with customary grace periods, as applicable) and provides that, upon the occurrence of an
event of default arising from the failure of certain guarantees to be in full force and effect or the failure of certain liens
to constitute a valid and perfected lien continuing for 30 days after receipt of written notice given by the trustee or the holders
of at least 30% in principal amount of the then outstanding Notes of a particular series, all outstanding Notes will become due
and payable immediately without further action or notice. If any other type of event of default occurs and is continuing, then
the trustee or the holders of at least 30% in principal amount of the then outstanding Notes of a particular series may declare
all Notes of such series to be due and payable immediately.
The above summary of the Indenture is qualified
in its entirety by reference to the Indenture, which is attached hereto as Exhibit 4.1, and is incorporated herein by reference.
Entry into Asset-Based Credit Facility
On June 8, 2020, Macy’s Inventory
Funding LLC (the “ABL Borrower”), an indirect wholly owned subsidiary of the Company, and its parent, Macy’s
Inventory Holdings LLC (the “ABL Parent”), entered into an asset-based credit agreement (the “ABL Credit Facility”)
with Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto. The ABL Credit Facility
provides the ABL Borrower with (i) a $2.851 billion revolving credit facility (the “Revolving ABL Facility”), including
a swingline sub-facility and a letter of credit sub-facility, and (ii) a bridge revolving credit facility of up to $300 million
(the “Bridge Facility”). The ABL Borrower may request increases in the size of the Revolving ABL Facility up to an
additional aggregate principal amount of $750 million.
Additionally on June 8, 2020 and
concurrently with closing the ABL Credit Facility, the ABL Borrower purchased all presently existing inventory, and assumed
the liabilities in respect of all presently existing and outstanding trade payables owed to vendors in respect of such
inventory, from Macy’s Retail Holdings, LLC (f/k/a Macy’s Retail Holdings, Inc.) (“MRH”), a wholly
owned subsidiary of the Company, and certain wholly owned subsidiaries of MRH. The ABL Credit Facility is secured on a first
priority basis (subject to customary exceptions) by (i) all assets of the ABL Borrower including all such inventory and the
proceeds thereof and (ii) the equity of the ABL Borrower. The ABL Parent guaranteed the ABL Borrower’s obligations
under the ABL Credit Facility. The Revolving ABL Facility matures on May 9, 2024 and the Bridge Facility matures on December
30, 2020.
The ABL Credit Facility contains customary
borrowing conditions including a borrowing base equal to the sum of (a) 80% (which shall automatically increase to 90% upon the
satisfaction of certain conditions, including the delivery of an initial appraisal of the inventory) of the net orderly liquidation
percentage of eligible inventory, minus (b) customary reserves. Amounts borrowed under the ABL Credit Facility are subject to interest
at a rate per annum equal to (i) prior to the Step Down Date (as defined in the ABL Credit Facility), at the ABL Borrower’s
option, either (a) adjusted LIBOR plus a margin of 2.75% to 3.00% or (b) a base rate plus a margin of 1.75% to 2.00%, in each case
depending on revolving line utilization and (ii) after the Step Down Date, at the ABL Borrower’s option, either (a) adjusted
LIBOR plus a margin of 2.25% to 2.50% or (b) a base rate plus a margin of 1.25% to 1.50%, in each case depending on revolving line
utilization. The ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness,
liens, fundamental changes, restricted payments, cash hoarding, and prepayment of certain indebtedness as well as customary representations
and warranties and events of default typical for credit facilities of this type.
The ABL Credit Facility also requires (1)
the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of
any fiscal quarter on or after April 30, 2021 if (a) certain events of default have occurred and are continuing or (b) Availability
plus Suppressed Availability (each as defined in the ABL Credit Facility) is less than the greater of (x) 10% of the Loan Cap (as
defined in the ABL Credit Facility) and (y) $250 million, in each case, as of the end of such fiscal quarter and (2) prior to April
30, 2021, that the ABL Borrower not permit Availability plus Suppressed Availability to be lower than the greater of (x) 10% of
the Loan Cap and (y) $250 million.
The above summary of the ABL Credit Facility
is qualified in its entirety by reference to the ABL Credit Facility, which is attached hereto as Exhibit 10.1, and is incorporated
herein by reference.
Amendment to Existing Credit Agreement
On June 8, 2020, the Company and MRH entered
into a first amendment (the “Revolving Credit Facility Amendment”) to its existing credit agreement (as amended, the
‘‘Revolving Credit Facility’’) among the Company, MRH, the lenders party thereto, and Bank of America,
N.A., as administrative agent and voluntarily reduced the lenders’ commitment under the Revolving Credit Facility, which provides the Company with unsecured revolving credit of up to $75 million.
The Revolving Credit Facility is unsecured.
The Revolving Credit Facility contains covenants that provide for, among other things, limitations on fundamental changes, use
of proceeds, and maintenance of property, as well as customary representations and warranties and events of default.
The above summary of the Revolving Credit
Facility Amendment is qualified in its entirety by reference to the Revolving Credit Facility Amendment, which is attached hereto
as Exhibit 10.2, and is incorporated herein by reference.