Walmart issues first bonds in two years to fund tender offer

2 min read
Americas, EMEA
David Bell

Retailer Walmart will fund a tender offer for high coupon bonds with a new US$7bn five-part corporate bond deal on Wednesday, which includes its first-ever green tranche.

The retailer, rated Aa2/AA/AA, priced five, seven, 10, 20 and 30-year bonds that will be mostly used to fund an US$8bn tender for a slate of 24 bond tranches, including its 7.55% notes due 2030, 6.750% debentures due 2023 and 6.50% notes due 2037.

The 10-year tranche, however, is the company's first green note and will be used to fund green projects in renewable energy, energy-efficient buildings and sustainable transport.

Walmart tapped into strong demand for the consumer goods sector. Home Depot, another retailing giant, benefited from similar support on Tuesday when it drew around US$8bn of demand for its US$3bn three-part bond.

Similar to Home Depot, Walmart started pricing some 30bp wide of secondary levels at initial price thoughts, according to analysts at CreditSights, before leads brought pricing tighter at guidance.

Active bookrunners Citigroup, Mizuho and Wells Fargo priced a US$1.25bn five-year, US$1.25bn seven-year, US$2bn 10-year green note, US$1bn 20-year and US$1.5bn 30-year bond at Treasuries plus 28bp, 40bp, 50bp, 62bp and 72bp, respectively. Those levels were unchanged from guidance but moved tighter from initial price thoughts of 55bp area, 65bp area, 75bp area, 85bp area and 95bp area, respectively.

Slim concessions are being seen across the board this week as underwriters take advantage of money managers' desire to put cash to work.

"The volatility of these blue chip bonds is going to be fairly low, but you're taking what the market gives you," said Adam Coons, portfolio manager at Winthrop Capital Management.

"If you're looking to play defense but still want a little bit of spread, that is the area we're going for right now," he said. "We are not reaching for lower quality spread product. We still like credit, but we are targeting higher quality like Home Depot and Walmart."

Walmart was last in the market in September 2019, when it issued a US$1.5bn two-part offering of senior notes consisting of a US$500m 2.375% 2029 and a US$1bn 2.95% 2049.

The 2.375% 2029s were last trading at a G spread of 35bp and the 2.95% 2049s at a G spread of 66bp on Tuesday, according to MarketAxess.

Updated story: adds investor comment, pricing details