Myer has been granted breathing room by lenders – and could even report a small net cash win this year.
Due to the significant impact of COVID-19 during the second half of the fiscal year, lenders have agreed to wave covenant testing at the end of FY2020.
Myer has also signed a binding term sheet with its existing lenders to amend and extend its bank facility until August 2022.
The amended facility of $340 million is smaller than the existing $360 million facility.
The reduced size was attributed to Myer’s success in deleveraging the balance sheet during the past two years, with a peak debt level of $220 million in 2019.
It was also attributed to an increase in net cash at the end of 1H20 by $65 million to $103 million when compared to 1H19.
Myer CFO Nigel Chadwick acknowledged the support providing by its lending syndicate.
“Securing this new facility with our existing lenders is testament to the work that we have undertaken during the past two years.
“It is particularly pleasing to have secured this extension to our facilities during such an unprecedented time of economic and social disruption in retail.
“We also wish to acknowledge the important and continuing support provided by the lending syndicate.”
Covenants for future periods will continue to be tested quarterly as per the previous facility but have been adjusted down and will range during the term of the facility.
On March 29, Myer closed all 60 stores for the health and safety of team members and customers.
At the same time, the difficult decision was made to stand down approximately 10,000 team members.
Stores were progressively reopened from 8 May 2020, with the majority of stores reopening on 27 May 2020.
As well as store closures for the majority of that two-month period, sales were further impacted by significant reductions in foot traffic, in particular CBD locations, and more recently the metropolitan Melbourne region.
Despite this, Myer has recorded strong growth in online sales throughout 2H20, and this growth accelerated significantly during the period of store closures.
As a result of support from the Federal Government via JobKeeper and other payment deferrals, the Company expects to report a small net cash positive position at the end of FY20.
This compares to $39 million in net debt at the end of FY19.
Following the announcement of Stage 4 Restrictions by the Victorian Government on August 3, Myer has temporarily closed all metropolitan Melbourne stores for six weeks.
Myer.com.au will continue to be available 24/7 across all categories, with the reduced free delivery threshold of $49 remaining in place.
In addition, as permitted under the Victorian Government directions, Click and Collect services will be available for Melbourne customers at selected metropolitan stores during this time: Myer Melbourne, Highpoint, Southland, Doncaster and Northland.
A number of Myer’s team members will not be required to work for the period of the store closures.
However, some team members will continue working throughout the period to support online fulfilment and Click and Collect.