Dive Brief:

• Nordstrom has closed on $675 million in new unsecured notes that the company says will cut its interest expenses by about $30 million and help reduce leverage on the company.
• The retailer plans to use the proceeds to pay off $600 million in senior secured bonds issued last year to raise cash in the early weeks of the COVID-19 crisis. The new bonds carry significantly lower interest rates and will free property from liens that Nordstrom used to back last year's bonds.
• Chief Financial Officer Anne Bramman said in a press release that the refinancing further strengthens Nordstrom's financial position after the "unprecedented challenges" of the pandemic.

Dive Insight:

Nordstrom was among the hardest hit companies in retail when COVID-19 began its spread in the U.S. Faced with both closed stores and reduced sending on apparel, especially the occasion and fashion apparel that is part of Nordstrom's core business, the retailer took extreme actions to keep the lights on. 

With cash crucial to staying resilient through the pandemic and its initial store closures, Nordstrom along with many of its peers took on new debt.

At the time, Nordstrom's revenue was in freefall, and financial markets were in turmoil, forcing the retailer to attach prized assets to the $600 million bonds it issued last April to raise desperately needed cash. It also saw its debt rating fall to junk after years of being among the healthier operators in the department store space. 

Both the liens and the junk rating were, according to a recent Bloomberg report, a "turning point" for the Nordstrom family, which populates the company's board, C-suite and shareholder ranks. Regarding the real estate used to back the bonds, Bloomberg reported that "the Nordstrom family has historically viewed the properties as a crown jewel asset and has been reluctant to surrender liens." 

In that context, the new bonds give Nordstrom more control over its operational and financial destiny. Along with lowering interest and freeing assets, a $425 million group of the new bonds don't come due until 2031, buying Nordstrom more time than last year's bonds, which matured in 2025. 

After the initial announcement of the new bonds, S&P Global Ratings lifted its outlook for Nordstrom to stable from negative. Analysts with the ratings agency expect an improved balance sheet and sales at Nordstrom as the year progresses, and noted its Market Strategy is bearing fruit.

"We believe Nordstrom will benefit from a recovery in apparel spending as consumers refresh their wardrobes throughout the year and easing restrictions support a return to in-person shopping," S&P analysts said in an emailed press release. "The company's Market Strategy, which enables inventory visibility across its digital and physical footprint, has shortened fulfillment times, increased product availability, and increased customer engagement."