With lower interest rates, Albertsons refinances bonds

Catie Clark//December 18, 2020//

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When interest rates drop, it is not just homeowners who take advantage of the lower rate to buy better loans.

In a similar sort of move, a different kind of refinancing is pursued by corporations that issue bonds. It is not at all unusual, when interest rates fall substantially, for a company to issue bonds at a lower rate of interest to buy out older bond debt that was issued at higher interest.

For example, in a move that will improve the liability side of its balance sheet, Albertsons announced on Dec. 2 that it would do exactly that. The Boise-headquartered grocery giant is issuing $600 million of senior note bonds at 3.500%, due 2029. The issue is expected to close on Dec. 22.

The company stated in its news release that it intends to use the proceeds from the new bonds, together with approximately $230 million of cash on hand, to fund a partial redemption of $800 million in outstanding senior notes at 5.750% that mature in 2025.