Walmart Inc. is selling $16 billion bonds to help finance its investment in India's biggest online seller. The bond sale would be the second-largest of the year, edging out an offering Bayer AG completed two days ago.The retailer is offering fixed- and floating-rate bonds in nine parts. The longest bond, a 30-year security, may yield around 1.05 percentage points above Treasuries, less than the initial 1.2 percentage points that was being pitched earlier in the day, 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 that it will acquire a 77 percent 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. In 2016, Walmart acquired e-tailer Jet.com Inc. for about $3.3 billion.
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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 CEO 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, which now becomes the year's third-largest bond sale. Both trail CVS Health Corp., which sold $40 billion of bonds in March to help fund its acquisition of Aetna Inc. |

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 percent 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 2 times EBITDA—earnings before interest, tax, depreciation, and amortization—and debt will jump by more than $10 billion. Before the Flipkart deal was announced, S&P had anticipated the company would pare its debt by $5 billion. 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.Moody's Investors Service, which rates both Walmart and its new bonds Aa2, an equivalent level to S&P's, has been more positive, applauding Walmart's “historically flexible” financial policy.“We continue with our credit positive view that Flipkart represents a significant long-term opportunity for Walmart as it recalibrates its international strategy to focus on growth markets,” Moody's analyst Charlie O'Shea said in a statement Wednesday.Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., HSBC Holdings Plc, and Wells Fargo & Co. are managing the bond sale, according to the filing.

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