Lupin 2023

Notes to finance Alliance Boots deal issued by Walgreens

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DEERFIELD, Ill. — Walgreen Co. has issued $4 billion in senior notes to repay borrowings that were used to finance its acquisition of an equity stake in Alliance Boots GmbH.

The notes were sold in five parts:  $550 million of floating-rate notes due in 2014, $750 million of 1% notes due in 2015, $1 billion of 1.8% notes due in 2017, $1.2 billion of 3.1% notes that are due in 2022, and $500 million of 4.4% notes payable in 2042.

The company intends to use the net proceeds from the sale to repay in full its borrowings made under an unsecured 364-day bridge term loan agreement made in July.

That loan was used to finance part of the cash payment for Walgreens’ purchase of a 45% stake in Alliance Boots. Proceeds will also be used for general corporate purposes, including the acquisition of USA Drug.

Standard & Poor’s Ratings Services assigned a BBB rating to the notes and maintained its BBB corporate credit rating and stable outlook on Walgreens.

Moody’s Investors Service assigned a rating of Baa1 to the notes and also affirmed its Baa1 rating for Walgreens’ senior unsecured notes. The ratings service maintained a negative outlook for Walgreens.

“Walgreen’s Baa1 senior unsecured rating reflects its strong market position as the largest drug store operator in the United States,” Moody’s said. “The Baa1 rating also acknowledges the strong market position of both Alliance Boots lines of business. … Moody’s views the drug store industry favorably, as its performance is expected to remain solid as the aging of the U.S., U.K. and European populations will likely drive increasing use of prescription drugs over the long term. Moody’s also believes the demand for prescription drug medication is somewhat resilient to recessionary pressures.”

Moody’s further noted that the rating was constrained by the additional debt Walgreens has taken on, which has temporarily weakened its credit metrics.

While its rating assumes that the company will repay a substantial amount of debt, the negative outlook represents the risk that the combined entity might not be able to deleverage as much as expected.


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