More signs of the renewal of department store group Myer Holdings (ASX: MYR), which on Monday revealed a major new refinancing of its debt with much easier terms.
The retailer told the ASX it had signed a four-year funding deal with JP Morgan and Gordon Brothers that CEO John King says will help stabilise the business and possibly allow it to resume paying dividends.
The funding package is a secured revolving credit and term loan facility with a maximum size of $215 million which in turn will move up and down based on the size of the Myer’s asset base.
The new deal is also a “covenant-light” arrangement (Seven West Media got one of those in its recent debt refinancing) with the major test being a liquidity covenant, which allows for dividends to be paid subject to available liquidity.
It does not feature a shareholder equity or leverage covenant.
Myer said it currently has a net cash position of $112 million and if it gets through what will be a tough first half for the 2021-22 financial year the company may be in a position to resume dividends towards the end of calendar 2022.
Myer’s previous finance packages featured some onerous covenants, which prompted worries whether the retailer would have been able to meet those covenant tests during the height of the pandemic.
“This is a strong vote of confidence in Myer’s strategic direction and achievements to date by the management team and board,” Mr King said in Monday’s statement.
“Under the facility, we have further confidence and ability to execute on our growth plans, particularly to accelerate our online and loyalty initiatives and ultimately pay dividends to our shareholders as soon as it is prudent to do so.”
Myer shares fell 4% to touch a low of 72.2 cents yesterday but rose in the afternoon to finish square for the day at 50 cents.