|12 Months Ended|
Jan. 28, 2012
|Debt Disclosure [Abstract]|
The Company’s debt is as follows:
Interest expense is as follows:
Future maturities of long-term debt, other than capitalized leases and premium on acquired debt, are shown below:
During 2011, 2010 and 2009, the Company repaid $439 million, $226 million and $270 million, respectively, of indebtedness at maturity.
On January 10, 2012, the Company issued $550 million aggregate principal amount of 3.875% senior notes due 2022 and $250 million aggregate principal amount of 5.125% senior notes due 2042, the proceeds of which will be used to retire indebtedness maturing during the first half of 2012.
On February 27, 2012, the Company notified holders of the $173 million of 8.0% senior debentures due July 15, 2012 of the Company's intent to redeem the debentures on March 29, 2012, as allowed under the terms of the indenture. The price for the redemption is calculated pursuant to the indenture and will result in the recognition of additional interest expense of approximately $4 million. By redeeming this debt early, the Company will save approximately $4 million of interest expense during 2012. In addition, the Company repaid $616 million of 5.35% senior notes due March 15, 2012 at maturity.
During 2010, the Company used approximately $1,067 million of cash to repurchase approximately $1,000 million of indebtedness prior to maturity. In connection with these repurchases, the Company recognized additional interest expense of approximately $66 million in 2010 due to the expenses associated with the early retirement of this debt.
In 2009, the Company completed a cash tender offer pursuant to which it purchased approximately $680 million of its outstanding debt scheduled to mature in 2009 for aggregate consideration, including accrued and unpaid interest, of approximately $686 million.
The following table shows the detail of debt repayments:
The following summarizes certain components of the Company’s debt:
Bank Credit Agreement
The Company entered into a credit agreement with certain financial institutions on June 20, 2011 providing for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which amount may be increased to $1,750 million at the option of the Company, subject to the willingness of existing or new lenders to provide commitments for such additional financing) outstanding at any particular time. This credit agreement is set to expire June 20, 2015 and replaces a $2,000 million facility which was set to expire August 30, 2012.
As of January 28, 2012, and January 29, 2011, there were no revolving credit loans outstanding under these credit agreements. However, there were less than $1 million of standby letters of credit outstanding at January 28, 2012 and January 29, 2011. There were no borrowings under these agreements throughout all of 2011 and 2010. Revolving loans under the credit agreement bear interest based on various published rates.
This agreement, which is an obligation of a wholly-owned subsidiary of Macy’s, Inc. (“Parent”), is not secured. However, Parent has fully and unconditionally guaranteed this obligation, subject to specified limitations.The Company’s interest coverage ratio for 2011 was 7.44 and its leverage ratio at January 28, 2012 was 2.17, in each case as calculated in accordance with the credit agreement. The credit agreement requires the Company to maintain a specified interest coverage ratio for the latest four quarters of no less than 3.25 and a specified leverage ratio as of and for the latest four quarters of no more than 3.75. The interest coverage ratio is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) over net interest expense and the leverage ratio is defined as debt over EBITDA. For purposes of these calculations EBITDA is calculated as net income plus interest expense, taxes, depreciation, amortization, non-cash impairment of goodwill, intangibles and real estate, non-recurring cash charges not to exceed in the aggregate $400 million and extraordinary losses less interest income and non-recurring or extraordinary gains. Debt and net interest are adjusted to exclude the premium on acquired debt and the resulting amortization, respectively.
A breach of a restrictive covenant in the Company’s credit agreement or the inability of the Company to maintain the financial ratios described above could result in an event of default under the credit agreement. In addition, an event of default would occur under the credit agreement if any indebtedness of the Company in excess of an aggregate principal amount of $150 million becomes due prior to its stated maturity or the holders of such indebtedness become able to cause it to become due prior to its stated maturity. Upon the occurrence of an event of default, the lenders could, subject to the terms and conditions of the credit agreement, elect to declare the outstanding principal, together with accrued interest, to be immediately due and payable. Moreover, most of the Company’s senior notes and debentures contain cross-default provisions based on the non-payment at maturity, or other default after an applicable grace period, of any other debt, the unpaid principal amount of which is not less than $100 million that could be triggered by an event of default under the credit agreement. In such an event, the Company’s senior notes and debentures that contain cross-default provisions would also be subject to acceleration.
The Company is a party to a $1,500 million unsecured commercial paper program. The Company may issue and sell commercial paper in an aggregate amount outstanding at any particular time not to exceed its then-current combined borrowing availability under the bank credit agreement described above. The issuance of commercial paper will have the effect, while such commercial paper is outstanding, of reducing the Company’s borrowing capacity under the bank credit agreement by an amount equal to the principal amount of such commercial paper. The Company had no commercial paper outstanding under its commercial paper program throughout all of 2011 and 2010.
This program, which is an obligation of a wholly-owned subsidiary of Macy’s, Inc., is not secured. However, Parent has fully and unconditionally guaranteed the obligations.
Senior Notes and Debentures
The senior notes and the senior debentures are unsecured obligations of a wholly-owned subsidiary of Macy’s, Inc. and Parent has fully and unconditionally guaranteed these obligations (see Note 17, “Condensed Consolidating Financial Information”).
Other Financing Arrangements
At January 28, 2012 and January 29, 2011, the Company had dedicated approximately $52 million of cash, included in prepaid expenses and other current assets, which is used to collateralize the Company’s issuances of standby letters of credit. There were approximately $34 million and $38 million of other standby letters of credit outstanding at January 28, 2012 and January 29, 2011, respectively.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef