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Walgreens Boots (WBA; B1, BB Neg) Priced refi debt in $s

CONSUMER STAPLES

$750m 5NC2 Snr Unec. (B1/BB) at 8.125% (eqv. T+432, OAS+410) vs. IPT 8.25-5%

    • NIC +90-100bps
    • Books upsized from $600m, reminder UoP was refi for the $1.2b (outstanding) $Nov 24s.
    • Closed+1.1pts/-35bps

  • We were tad surprised - we expected gross paydowns here instead of refi with leverage in 5x and asset sales last week for $1.1b. We are not sure where the excess cash is going...it did disclose a secured loan given to loss-making VillageMD saw defaults last week - a forbearance agreement has been entered into there.
  • Refi is also concerning given ICR's are in focus here. It's handed out a sizeable NIC to get it done and at the refi cost/ against the $24s is +4.325% (or +$32.4m/yr in interest). YTD (9m to May) interest expenses are running at $351m vs. adj. EBIT of $2.2b.
  • We are not sure why it didn't come after earnings in late June - Moody's came soon after but S&P took its time to Junk it (in late July) and there was about 100bps added after that (on the 30s). Reminder both did double-notch downgrades.
  • Regardless a positive for the £25s and €26s - chunky debt taken out ahead of it and more importantly it has proven it can (even if costly) refi in the $ market. Impact in secondary was ; $26 -10, $30 +18, $34 +9, $42 -11 - not horrible but might be hidden behind poor liquidity.
  • £300m line next up - as analyst we can only hope it refi's.

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