JP Morgan Chase & Co. (NYSE:JPM) is reportedly gauging investor interest in a possible issuance of high-yield bonds by Walgreens Boots Alliance, Inc. (NASDAQ:WBA), aimed at managing the drug-store chain's recently downgraded near-term debt obligations.
Preliminary discussions on pricing suggest a yield in the vicinity of 7.5%, reported Bloomberg, citing people familiar with the discussions.
The specific size and duration of the deal have not been finalized. Walgreens currently holds a $1.16 billion note maturing on November 18, trading close to par, and a £300 million ($387 million) bond due in late 2025, as per Bloomberg data.
Should Walgreens proceed with a bond sale, it would mark their first issuance since being downgraded to junk status by both Moody's Ratings and S&P Global Ratings.
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This move would entail significantly higher costs, with the highest coupon rate currently at 4.8% on a 2044 bond issued a decade ago.
In January, Walgreens nearly halved its dividend following a CEO change. Meanwhile, Rite Aid Corp (OTC:RADCQ) is in bankruptcy, CVS Health Corporation (NYSE:CVS) faces retail challenges, and Walmart Inc. (NYSE:WMT)
scrapped plans for low-cost clinics due to cost and reimbursement issues.
S&P's recent BB downgrade indicates Walgreens' leverage ratio could remain above five times into fiscal 2025 and beyond, Bloomberg added.
Price Action: WBA shares are trading higher by 2.24% to $11.41 at last check Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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