What happened
Shares of upscale retailer Nordstrom (JWN -0.08%) were rising on Thursday morning after the company announced that it will raise $600 million to ensure that it has the cash to weather the coronavirus pandemic.
As of 11:30 a.m. EDT today, Nordstrom's shares were up about 11.3% from Wednesday's closing price.
So what
Nordstorm said late on Wednesday that it has priced a $600 million offering of senior secured notes. The notes will pay 8.75% interest, are due in 2025, and are secured by a pool of real estate assets including six of the company's stores and six distribution centers.
Image source: Nordstrom.
Moody's Investors Service rated the Nordstrom offering at Baa2, solidly investment grade. But in doing so, it cut the company's overall bond rating by a notch, from Baa2 to Baa3 -- still investment grade, but closer to the edge of junk status.
Moody's said that while Nordstrom's actions to bolster its balance sheet are prudent, and that it's well positioned overall under the circumstances, it (not surprisingly) has some concerns about how the company will fare amid the COVID-19-related disruptions in the consumer discretionary sector.
Nordstrom closed all its brick-and-mortar stores in the U.S. and Canada on March 17. Its online storefronts, which generated about a third of its sales last quarter, have remained open.
Now what
Nordstrom had previously told investors that it has suspended its dividend and share-buyback program for the time being, and that it drew down $800 million from its line of credit. The added $600 million raised by these notes appears to be giving investors more confidence in the company's chances of a full recovery once the pandemic fades.
