Macy's decision to close a bunch of stores could spell trouble for billions of dollars of loans

Sluggish sales at Macy's are hurting more than just the mega-retailer itself.

The department store chain recently announced that it would be closing 100 stores in a bid to shore up business. That could impact about $3.64 billion in commercial mortgage-backed securities debt, according to a report by Morningstar Credit Ratings' Steve Jellinek and his team.

More of Macy's locations are expected to shutter, Morningstar said, citing below-average sales per square foot.

Here is MorningStar:

"CMBS exposure to Macy's as a collateral tenant totals about $7.13 billion. We also found an additional $21.36 billion in loans exposed to the store as a shadow anchor. We analyzed the most recent available store-level sales in postcrisis deals and identified 28 locations backing $3.64 billion in loans that have an elevated risk of being closed because the property's sales fell below Macy's average sales of $169 per square foot in 2014, the most recent available."

Retail giants like Macy's are usually one of the anchor tenants for regional malls, and their departure can cause problems for those malls. MorningStar gave the example of Hudson Valley Mall, a 618,780-square-foot shopping center in upstate New York that's now in foreclosure. Macy's shuttered its location in the mall in the first quarter, and J.C. Penney's exited last year.

These anchor tenants make up a sizeable chunk of mortgage-backed deals, and regional malls typically suffer large losses when vacancy rates surge and loans go into default.

Morningstar expects to see a $32.4 million loss on the $49.2 million loan at Hudson Valley Mall.

Notably, Macy's doesn't own all of its locations. Some of them are run by real-estate investment trusts, which allows investors to bet on retail without being too concentrated in a single retailer.

"Macy's has 690 full-line department stores (including Bloomingdale's) as of second quarter 2016, and REITs own about 400 stores. This means nearly 300 are in the hands of smaller operators who will find it more difficult to backfill any vacancy," Jellinek wrote.