McDonald’s Corp. sold bonds to repay debt ahead of a batch of maturities due next year.
The fast food giant sold $2 billion of investment-grade rated bonds in three parts, according to a person with knowledge of the matter. The longest portion, an $800 million 30-year tranche yielded 1.28 percentage point over Treasuries, said the person, who asked not to be identified as the details are private. Initial discussions suggested 1.5 to 1.55 points.
Citigroup Inc. and Goldman Sachs Group Inc. are among the banks that led the deal. The debt is rated Baa1 by Moody’s Investors Service and BBB+ by S&P Global Ratings.
“The new debt could push out part of the $4 billion of bonds maturing through 2024 as McDonald’s balances the priorities of applying cash flow to shareholders and helping franchisees, whose margins have been squeezed by input pressures,” said Jody Lurie, a senior credit analyst for Bloomberg Intelligence in a Wednesday note. The new issue could keep debt tight to other BBB consumer-company bonds, helped by revenue momentum and improved credit metrics over recent quarters, she added.
Other potential uses for the new debt include capex to support management’s “experience of the future” initiative for restaurant modernization investments, according to a CreditSights note on Wednesday. The company has maturities upcoming in other currencies as well, including euros and Australian dollars later this year, according to the research firm and data compiled by Bloomberg.
This is the chain’s second time tapping the bond market this year after it came to the European market in February. The company has more than $40 billion in total debt outstanding as of Wednesday, according to data compiled by Bloomberg.
The McDonald’s offering follows a stream of new debt sales by blue-chip companies this week. Toyota Motor Credit Corp. also came to the bond market Wednesday, while at least eight borrowers sold new deals on Tuesday.
Representatives for McDonald’s and Toyota didn’t immediately reply to requests for comment.
--With assistance from Josyana Joshua.
(Updates to show deal priced in second paragraph.)