Walmart Inc. is selling $16 billion bonds to help finance its investment in India's biggest online seller. The bond sale would be the second-largest of the year, edging out an offering Bayer AG completed two days ago.The retailer is offering fixed- and floating-rate bonds in nine parts. The longest bond, a 30-year security, may yield around 1.05 percentage points above Treasuries, less than the initial 1.2 percentage points that was being pitched earlier in the day, according to a person with knowledge of the matter, who asked not to be identified because the details are private.Walmart, the world's largest retailer, said last month that it will acquire a 77 percent stake in Flipkart Group for $16 billion, leaving the remainder to Flipkart co-founder Binny Bansal and other shareholders. The deal—Walmart's largest ever—gives it greater access to India's fast-growing e-commerce market as the company tries to challenge Amazon.com Inc. In 2016, Walmart acquired e-tailer Jet.com Inc. for about $3.3 billion.

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Just a week before Walmart announced its plans for a stake in Flipkart, it agreed to cede control of its British business, Asda, to a competitor for $10 billion. The sale reflects CEO Doug McMillon's strategy to focus on high-potential markets, such as China and India.The mega bond issue follows a $15 billion offering from Bayer, which now becomes the year's third-largest bond sale. Both trail CVS Health Corp., which sold $40 billion of bonds in March to help fund its acquisition of Aetna Inc.

Potential Downgrade

The Flipkart acquisition has drawn heavy skepticism from Wall Street, prompting several equity analysts to either cut their price target for Walmart's stock or place it under review. S&P Global Ratings said there's about a 33 percent chance it may downgrade Walmart's AA rating in the next two years due to the company's “aggressive global deal-making” as it tries to compete with Amazon.Leverage will rise to about 2 times EBITDA—earnings before interest, tax, depreciation, and amortization—and debt will jump by more than $10 billion. Before the Flipkart deal was announced, S&P had anticipated the company would pare its debt by $5 billion. Walmart also plans to continue its current share buyback program, indicating a “potentially less conservative financial policy” going forward, S&P analyst Diya Iyer said in a May 9 report.Moody's Investors Service, which rates both Walmart and its new bonds Aa2, an equivalent level to S&P's, has been more positive, applauding Walmart's “historically flexible” financial policy.“We continue with our credit positive view that Flipkart represents a significant long-term opportunity for Walmart as it recalibrates its international strategy to focus on growth markets,” Moody's analyst Charlie O'Shea said in a statement Wednesday.Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., HSBC Holdings Plc, and Wells Fargo & Co. are managing the bond sale, according to the filing.

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Walmart Launches $16 Billion Bond Deal

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