Kroger Co. sold $10.5 billion of notes to help fund its acquisition of fellow grocer Albertsons Cos. in one of the biggest corporate bond deals of the year.
The supermarket chain issued the bonds in seven parts, according to a person with knowledge of the matter. The longest portion of the deal, a 40-year security, yields 1.62 percentage points over Treasuries after initial discussions of around 1.9 percentage points, said the person, who asked not to be identified as the details are private.
Dealers racked up orders that peaked through $56 billion, Bloomberg’s Brian Smith wrote in a note. Demand was skewed to the longer tenors.
Some of the tranches include so-called special mandatory redemption language, which would allow the company to repay the debt in the event that the Albertsons acquisition isn’t completed. In that case, proceeds from notes not subject to the special redemption will be used for general corporate purposes.
The deal size makes Kroger’s the fifth biggest U.S. investment-grade bond sale in 2024, tied with Meta Platforms Inc.’s $10.5 billion deal earlier this month.
Representatives for Kroger declined to comment. Representatives for Wells Fargo & Co. and Citigroup Inc., the managers on the deal, also declined to comment.
Moody’s Ratings assigned a Baa1 rating with a negative outlook to Kroger’s unsecured notes, citing risks including higher debt levels and a deterioration in credit metrics, according to a statement. S&P Global Ratings put the new bonds at BBB.
Kroger agreed to buy Albertsons in October 2022 in a deal initially valued at $24.6 billion. Whether the Cincinnati, Ohio-based supermarket chain is able to purchase its smaller peer remains uncertain.
A trial is set to begin Aug. 26 on the Federal Trade Commission’s lawsuit to block the deal, initially valued in 2022 at $24.6 billion. A separate case involving Colorado’s opposition to the proposed buyout is scheduled to start Sept. 30. The supermarket operators have proposed to sell nearly 600 stores and lower grocery prices by $1 billion.
As of Feb. 3, Kroger operated 2,722 supermarkets under a variety of local banner names such as Dillons and Ralphs in 35 states and the District of Columbia, the company said in a filing.
