Cencosud Plots Acquisition Debt Takeout

After announcing the $2.6bn acquisition of Carrefour’s Colombian operations Thursday, Cencousud plans to access both the bond and equity markets to help fund the purchase. The Chilean supermarket operator signed a $2.5bn 12-18 month bridge loan from JPMorgan, which it will seek to replace. To do so, Cencosud plans a $1.5bn equity capital increase and the issue of $1bn 10-year bonds in the international market. The equity sale should occur within four months and the bond sale within three, according to remarks from company officials cited in local news and wire reports. The equity sale would come after a $1.23bn follow-on completed in June. The retailer’s last visit to the international bond markets came in early 2011. It sold $750m in 2021 bonds at a 5.661% yield, with 3.5x demand, through Deutsche Bank, JPMorgan and Santander. Fitch has placed Cencosud’s BBB minus rating on negative watch following Thursday’s purchase. Barclays calls the acquisition “credit negative,” seeing it as expensive by traditional metrics, and expresses concern about increased leverage. “The pressure for companies to act on buying opportunities even if their balance sheets are already stretched is a reality of the hyper-competitive food retail sector, but we do not believe bonds fully reflect these risks,” the bank says.