Walgreens prints $6 billion of bonds; AT&T tightens; Anheuser-Busch eases; credit spreads flat

By Cristal Cody

Eureka Springs, Ark., May 26 – Walgreens Boots Alliance Inc. priced $6 billion of notes in five tranches on Thursday, bringing the week’s total volume to just over $20 billion, in line with market forecasts.

Primary action is expected to be quiet on Friday with bond markets closing early ahead of the Memorial Day holiday weekend.

In the secondary market, AT&T Inc.’s 4.125% senior notes due 2026 tightened nearly 10 basis points on Thursday.

Anheuser Busch InBev Finance Inc.’s 3.65% notes due 2026 headed out about 1 bp weaker in secondary trading.

The Markit CDX North American Investment Grade index ended the day mostly flat at a spread of 77 bps.

Walgreens prices $6 billion

Walgreens Boots Alliance priced $6 billion of notes in five tranches on Thursday, according to a FWP filing with the Securities and Exchange Commission.

The company sold $1.25 billion of 1.75% two-year notes at 99.963 to yield 1.769%, a spread of 90 bps over Treasuries.

The $1.5 billion tranche of 2.6% five-year notes priced at 99.944 to yield 2.612%, or Treasuries plus 125 bps.

Walgreens sold $750 million of 3.1% seven-year notes with a spread of 150 bps over Treasuries. The notes priced at 99.725 to yield 3.144%.

The company brought $1.9 billion of 3.45% 10-year notes at 99.748 to yield 3.48%, a spread of 165 bps plus Treasuries.

In the long bond tranche, Walgreens sold $600 million of 4.65% 30-year notes at 99.216 to yield 4.699%, or Treasuries plus 205 bps.

BofA Merrill Lynch, HSBC Securities (USA) Inc., UBS Securities LLC, J.P. Morgan Securities LLC, Lloyds Securities Inc., MUFG, Mizuho Securities USA Inc., UniCredit Capital Markets LLC and Wells Fargo Securities, LLC were the bookrunners.

Proceeds will be used to help fund the cash portion for the company’s acquisition of Rite Aid Corp., to retire a portion of Rite Aid’s existing debt and for general corporate purposes.

If the merger is not completed on or before the occurrence of a special mandatory redemption trigger, set for one year after the note sale closes, Walgreens will be required to redeem the notes due in 2018, 2021 and 2023 at a price of 101% of par.

Proceeds from the sale of the 2026 and 2046 notes then would be used for general corporate purposes.

Walgreens is a Deerfield, Ill.-based drugstore chain.

AT&T tightens

AT&T’s 4.125% notes due 2026 (Baa1//A-) traded 9 bps better on Thursday at 166 bps bid, a market source said.

AT&T sold $900 million in a reopening of the bonds on May 3 at Treasuries plus 150 bps.

The notes originally were priced on Jan. 29 in a $1.5 billion tranche at 195 bps over Treasuries.

AT&T is a Dallas-based telecommunications company.

Anheuser-Busch eases

Anheuser Busch InBev’s 3.65% notes due 2026 were seen trading about 1 bp weaker at 131 bps bid, a source said.

Earlier in the day, the notes (A3/A-/BBB+) had been quoted 3 bps softer at 130 bps offered.

The company sold $11 billion of the notes on Jan. 13 at a spread of Treasuries plus 160 bps.

Anheuser Busch InBev’s ratings were dropped to A3 from A2 by Moody’s Investors Service on Wednesday due to what the rating agency said would be the significant debt and high leverage the parent company will incur to complete a $106 billion cash and stock acquisition of SABMiller plc.

Fitch downgraded Anheuser Busch’s ratings to BBB+ from A earlier in the month.

The brewery is based in Leuven, Belgium.

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