Walmart Stores has sold bonds to refinance debt as it girds for an online battle against Amazon.
The world’s largest retailer issued $6 billion of unsecured bonds in six parts, according to a person with knowledge of the matter, after cutting a three-year floating rate note from the offering.
The longest portion, a 30-year security, yields 75 basis points, or 0.75 percentage point above Treasuries, down from initial talk of around 95 basis points, said the person, who asked not to be identified because the deal is private.
Retail Growth
Walmart has posted 12 straight quarters of same-store sales growth in the US thanks to improvements it made to clean up stores and inventory, along with an online push under e-commerce chief Marc Lore to catch up with Amazon.
The company said Tuesday that US web sales will grow 40% next year. The forecast, along with a $20 billion share buyback, lifted the shares to their biggest gain in more than a year.
The proceeds will help retire up to $8.5 billion of securities in a tender offer, which range in maturities from 2019 to 2044, according to an October 6 statement.
Outlook
Fitch Ratings rated the debt AA with a stable outlook. “Walmart is improving the in-store experience while deepening its digital relationship with customers due to the increasingly competitive landscape and shifting consumer buying habits,” Fitch analyst Carla Taylor said in a report Wednesday.
Barclays Plc, Citigroup Inc., Morgan Stanley, HSBC Securities Inc., JPMorgan Chase & Co. and Mizuho Financial Group Inc. managed the bond sale, Bentonville, Arkansas-based Walmart said in a filing Wednesday.
Some of the world’s biggest companies have done similar transactions in anticipation of possible tax-law changes. By buying back bonds now that trade at prices above their maturity values, companies are essentially pre-paying interest, which they can deduct from their income while tax rates are still high.
That will prove wise if tax rates end up falling, reducing the value of the deduction, or if the deduction ends altogether, both of which have been proposed by Republican lawmakers.
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