After doubling the deal size, Whole Foods Market today completed a $1 billion offering of 5.2% notes due December 2025 at T+300, or 5.218%. The issue, which was originally marketed at $500 million, was printed through early whispers in the low-T+300s.
Proceeds will be used for working capital and general corporate purposes, including stock repurchases and the repayment of indebtedness from time to time. On Nov. 4, after releasing quarterly earnings that missed expectations, Whole Foods also announced a new $1 billion share repurchase program. The new authorization does not have an expiration date.
Austin, Tex.–based Whole Foods operates natural and organic foods super markets.
Earlier today, Standard & Poor’s assigned a BBB– rating to the new 10-year notes. “Our ratings and the negative outlook on the corporate credit rating reflect our view that Whole Foods remains the leader in the natural and organic sub segment of the highly fragmented food retail industry, yet its overall share of the food retail industry is still relatively small and under pressure,” the agency said today.
Following the buyback announcement earlier this month, S&P revised the outlook on its BBB– rating to negative, from stable, reflecting the “expectations that Whole Foods’ credit protection measures could weaken below our previous forecast over the next two years because of less conservative financial policies combined with weaker operating performance. We anticipate that the company will encounter difficulties in achieving its operational goals in light of its shift in strategic priorities. This includes focusing more on price investments and expense management in response to declining sales trends,” the agency said on Nov. 5.
On Nov. 10, Moody’s assigned a Baa3 senior unsecured rating to Whole Foods. “Despite recent weakness in operating performance and the potential of a $1 billion increase in funded debt to primarily finance share repurchases, the company’s proforma credit metrics will remain strong with lease adjusted leverage of about 3.1 times. We expect management initiatives including price investments, cost cuts, expense control and moderation in new store growth to result in improved profitability in the next 18-24 months,” analysts said. Terms:
|Issuer||Whole Foods Market|
|Issue||144A/Reg S (with registration rights)|
|Maturity||Dec. 3, 2025|
|Call||Make-whole T+45 until notes are callable at par from three months prior to maturity|
|Trade||Nov. 30, 2015|
|Settle||Dec. 3, 2015|
|Px Talk||IPT low-T+300s|
|Notes||Upsized from $500 million|
|Proceeds will be used to fund a share repurchase program|