US-based grocery giant Kroger is preparing to issue up to $10bn in corporate bonds as it seeks to finance its proposed acquisition of Albertsons, Bloomberg reported, citing people familiar with the matter.
The deal, which has faced significant antitrust scrutiny, could see Kroger launch the bond sale as early as today (20 August).
According to the news agency, the company plans to issue bonds across seven tranches, with maturities ranging from 2026 to 2064.
Proceeds from the debt offering, combined with existing cash reserves and potential additional borrowing, will reportedly be used to fund the Albertsons merger.
While Kroger has initiated investor calls and exchanged Albertson's bonds for new notes, the future of the deal remains uncertain.
The US Federal Trade Commission (FTC) is set to challenge the merger in court later this month, with the state of Colorado also opposing the acquisition.
In response, Kroger and Albertsons have proposed divesting nearly 600 stores and implementing price cuts of $1bn.
Additionally, Kroger has initiated legal action against the FTC, claiming that the agency’s internal judicial process is unconstitutional.
The grocery chain is seeking a preliminary injunction in the US District Court, Southern District of Ohio, to halt the FTC’s administrative proceedings that challenge the proposed merger.
Despite the regulatory hurdles, investment bank JPMorganChase maintains an overweight position on Albertson's debt.
Analysts reportedly believe that if the merger is completed, Albertson's bond values will converge with Kroger’s.
Even with a 50% probability of the deal succeeding, the current pricing of Albertson's debt appears undervalued.
Kroger’s bond sale is a significant development in the ongoing saga of The Kroger-Albertsons merger.
The outcome of the antitrust cases will determine whether the deal proceeds and, consequently, the success of the bond issuance.
The two retailers entered into an agreement in October 2022, under which Kroger will acquire all of Albertsons for an enterprise value of $24.6bn.
