Woolworths may sell bonds in debt move

SYDNEY: Woolworths, Australia's biggest retailer, may sell bonds as it seeks to refinance about A$3 billion ($3.7 billion) of debt by the end of 2012.

"There is a place for the local corporate bond market within our debt profile," said group treasurer Asrar Rahman.

Australian non-financial companies have sold A$1.3 billion of bonds this year compared to A$409 million in the same period last year as markets began to thaw after the global credit freeze, according to data compiled by Bloomberg.

The extra yield investors demand to own Australian corporate notes instead of similar-maturity government debt fell 7 basis points to 194 basis points on Thursday, down from a record 433 in April 2009, according to a Bank of America Merrill Lynch index.

The nation's companies have about A$140 billion of debt due in 2011 and 2012, according to Fitch Ratings.

Woolworths, based in Sydney, cut its annual sales growth forecast on April 30 citing lower food price inflation and the absence of government cash handouts that stoked demand a year earlier.

The retailer has Australian dollar and US dollar notes totalling A$350 million and US$300 million due next year, Bloomberg data shows.

US and Australian dollar loans worth A$800 million and US$700 million are due in 2012. The company could buy back A$600 million of hybrid notes from September 2011, Rahman said.

Woolworths will "remain cautious over execution risk" as it considered a local bond sale, Rahman said. The domestic note market is "not very deep or liquid", and the average maturity of debt is 2 years, government officials wrote in a November paper.

Rahman said he didn't favour the retail bond market, as the process was still onerous even after the Government moved to relax prospectus requirements.

- BLOOMBERG