(JWN) Nordstrom’s New Credit Facility

One of the leading fashion specialty retailers in the U.S., Nordstrom Inc. (JWN) has entered into a new five-year unsecured revolving credit agreement with a consortium of world’s leading investment bankers for optimizing its capital structure.

Bank of America Merrill Lynch Wells Fargo Securities, LLC are offering the total amount of $600.0 million to the new revolving credit line facility maturing in June 2016. The company would have to pay an interest of LIBOR plus a margin of 1.125% on the outstanding amount and a commitment fee of 0.125% on the total capacity. The new credit facility will replace the company’s prior unsecured revolving credit facility of $650.0 million, which was schedule to mature in August 2012.

Under a revolving credit facility, a company can borrow again once it repays all dues under the old credit facility. The company may utilize this fund for general corporate purposes, which includes repayment of outstanding commercial papers, working capital and capital investment or acquisitions.

Nordstrom has also notified that it has terminated the $650.0 million credit facility entered on August 14, 2009, effective from June 23, 2011, as there were no outstanding borrowings under the credit facility. Under this credit facility, the company has paid a variable rate of interest of LIBOR plus a margin of 1.750% on the outstanding balance and a commitment fee of 0.250% on the total capacity.

Based in Seattle, Washington, Nordstrom is a leading fashion specialty retailer in the U.S., offering high quality apparel, shoes, cosmetics and accessories for men, women and kids. The company offers both branded and private label merchandise, as well as a private label card, two Nordstrom VISA credit cards and debit cards to be purchased from Nordstrom stores.

The company operates in a highly fragmented specialty retail sector and faces intense competition from other well-established players, such as Gap Inc. (GPS) and Abercrombie & Fitch (ANF).

Nordstrom currently holds Zacks #3 Rank, implying a short-term Hold rating. We retain our long-term Neutral recommendation on the company.

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