Federated to Further Improve Capital Structure

Business Wire, July 7, 1997

CINCINNATI--(BUSINESS WIRE)--July 7, 1997--Federated Department Stores, Inc. announced today that it has reached an agreement with Prudential Insurance Co. to prepay $498.4 million aggregate principal amount of mortgage debt. The transaction is expected to be financed by Federated's issuance of long-term unsecured notes through an underwriting group led by Goldman Sachs. The company also is pursuing the replacement of its $2.5 billion (as of May 3, 1997) secured bank credit agreement with a $2.0 billion unsecured bank credit facility. Administrative agents and arrangers for the new bank facility are Citibank and Chase Manhattan Bank.

James M. Zimmerman, Federated's chairman and chief executive officer, said "The company's operating results and our recent credit rating upgrade, coupled with the excellent conditions in the credit markets, make this an opportune time for us to refinance a large portion of our debt." Ronald W. Tysoe, Federated's vice chairman and chief financial officer, added that "These transactions enable us to lower our total interest expense, eliminate much of our secured debt and substantially extend the maturities of our debt, thereby improving our financial flexibility."

Together, these transactions will result in an extraordinary charge in the quarter of approximately $60-$65 million relating to the premium being paid for the mortgage prepayment and the write-off of deferred financing charges on the refinanced debt. As a result of these transactions, the company expects to save $15-$20 million in annual interest expense.

Federated, with corporate offices in Cincinnati and New York, is one of the nation's leading department store retailers, with annual sales of more than $15 billion. Federated currently operates more than 400 department stores and more than 150 specialty stores in 36 states. Federated's department stores operate nationally under the names of Bloomingdale's, The Bon Marche, Burdines, Goldsmith's, Lazarus, Macy's, Rich's and Stern's. Federated's specialty stores include Aeropostale and Charter Club.

(Note: Information on Federated and its operating divisions is available on the Internet, at www.federated-fds.com . Copies of past press releases and corporate background data, also is available by calling Fax-On-Demand at 1-800-853-9150).

CONTACT: Federated Department Stores, Inc., Cincinnati

Media - Carol Sanger, 513/579-7764

Investor - Susan Robinson, 513/579-7780