CHICAGO (MarketWatch) -- Macy's Inc. shares leaped Wednesday as the retail sector edged higher.
Macy's surged 18% after the big department-store operator said it modified its $2 billion bank-credit facility with Bank of America and J.P. Morgan Chase. The agreement gives Macy's more financial flexibility to weather the economic downturn.
The facility matures Aug. 31, 2012.
"Given our strong cash flow and healthy balance sheet, this action should remove any question about the financial strength of Macy's, including our ability to retire $950 million in debt that is maturing in 2009," Chief Executive Officer Terry Lundgren said in a statement.
Macy's shares closed at $10.01.
Overall, the S&P Retail Index gained almost 2% to 291 points.
Shares of Liz Claiborne fell 1% to $3. Late Tuesday, the company said that its board voted to suspend the company's quarterly cash dividend "indefinitely." The company last paid a dividend of 5.625 cents a share on Dec. 15.
"Given what is going on in the world, and the retail sector in particular, we have made the difficult but necessary decision to suspend our dividend," said Kay Koplovitz, chairman of the board. "As we continue to weather this tough holiday season, with consumer spending levels expected to continue to be very low, halting our dividend is an important way to enhance our financial flexibility."
Office Depot's shares rose slightly to $2.70 after Moody's lowered its corporate family and probability of default ratings to Ba3 and cut its senior unsecured note rating to B1. The downgrade is due to a weak sales environment, which is forcing the office-supplies retailer to close underperforming stores, as well as the expectation that fourth-quarter operating performance will be sluggish.
"Office Depot's decision to cull its store and distribution center base and slow new store openings in the face of a difficult macroeconomic-driven sales environment makes sense for the long-term," Charlie O'Shea, Moody's senior analyst, said. The outlook is negative.
Elsewhere in retail, Targe slipped 1%, while Wal- Mart lost 5 cents to $55.19. Sears Holdings gained 10 cents to $40.20.
