W al mart selling bonds to fund Flip kart deal

Walmart is selling bonds to help finance its acquisition in India’s biggest online seller, stuffing the US investment grade market with another jumbo deal just two days after the second-largest of the year.

The firm is offering fixed and floating-rate bonds in as many as nine parts, according to a filing on Wednesday. The longest portion of the offering, a 30-year security, may yield around 1.2 percentage points above Treasuries, according to a person with knowledge of the matter, who asked not to be identified because the details are private.

Walmart, the world’s largest retailer, said last month it would acquire a 77 per cent stake in Flipkart Group for $16 billion, leaving the remainder to Flipkart co-founder Binny Bansal and other shareholders. The deal — Walmart’s largest ever — gives it greater access to India’s fast-growing e-commerce market as the company tries to challenge Amazon.com Inc. Walmart acquired e-tailer Jet.com Inc. for about $3.3 billion in 2016.

Just a week before Walmart announced its plans for a stake in Flipkart, it agreed to cede control of its British business, Asda, to a competitor for $10 billion. The sale reflects Chief Executive Officer Doug McMillon’s strategy to focus on high-potential markets, such as China and India.

The mega bond issue follows a $15 billion offering from Bayer AG, which priced the second-largest bond sale of the year on Monday to help fund its acquisition of Monsanto Co.

Potential downgrade

The Flipkart acquisition has drawn heavy skepticism from Wall Street, prompting several equity analysts to either cut their price target for Walmart’s stock or place it under review. S&P Global Ratings said there’s about a 33 per cent chance it may downgrade Walmart’s AA rating in the next two years due to the company’s “aggressive global deal-making” as it tries to compete with Amazon.

Leverage will rise to about two times Ebitda and debt will jump by more than $10 billion, compared to S&P’s expectation for a $5 billion reduction. Walmart also plans to continue its current share buyback program, indicating a “potentially less conservative financial policy” going forward, S&P analyst Diya Iyer said in a May 9 report.