Walmart Inc Fixed Income Analysis: Debt, Maturity & Interest

This report provides a detailed analysis of Walmart Inc's debt, referencing their 10-Q filings. It highlights a long-term debt of $44,958 million, including debt from the Flipkart acquisition. The analysis covers the company's debt maturity distribution, showing that approximately 70% matures after 2023. It also examines the debt's nature and currency, noting a majority is fixed-rate and denominated in USD. The report suggests Walmart prefers long-term, fixed-rate debt to mitigate interest rate fluctuation risks. Short-term financing needs are met through inter-corporate funds and efficient working capital management. The analysis considers potential credit rating impacts and their implications for bondholders.

FIXED INCOME ANALYSIS
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!) In order to opine on the amount of debt in the books of Walmart Inc, the 10-Q for the
quarter ending July 31, 2018 has been taken into consideration. The long term debt for the
company stood at $ 44,958 million. Further, the component of long term debt that is due for
repayment within next one year amounts to $ 1,090 million. It is imperative to note that the
given debt figure includes the $16 debt funding through issue of bonds for the acquisition of
FlipKart (Walmart, 2018b). This is relevant as there have been talks with regards to potential
lowering of credit rating of the company which could imply higher risk for the bondholders
and hence higher returns would be demanded (Molly, 2018).
With regards to bank loan, the company does have line of credits from 23 financial
institutions extending $ 12.5 billion and uses the same as and when required. However, as on
January 31, 2018, these lines of credit were lying unused as indicated below (Walmart,
2018a).
While the company does not have any stated debt issuance policy, it is observed that long
term debt is issues primarily in the form of bonds which potentially allows the company to
procure funding at a cheaper cost compared to banks. With regards to short term financing
needs, these are met primarily though inter-corporate funds and also working capital deficits
are efficiently managed thereby lowering the working capital needs (Walmart, 2018a).
2) The distribution of the debt in terms of maturity is indicated as follows (Walmart, 2018b).

It is apparent that about 70% of the debt has a maturity after 2023. This offers comfort to the
bondholders as the near term maturities are not significant considering the operational cash
flows generated by the company.
The distribution of the long term debt based on the nature and currency is indicated as
follows (Walmart, 2018a).
Based on the above, it is apparent that majority of the debt of the company is fixed rate which
immunes it from the fluctuation in interest rate and hardening of interest rate cycle. Only
about 2.5% of the total long term debt has a variable interest rate. Further, about 80% of the
debt is in USD while the remaining is concentrated in Euro, Pound and Japanese Yen.
Considering the debt profile, it seems that the company is more interested in issuing long
term debt and prefers tom opt for fixed interest rate so as to avoid paying higher interest rates
owing to increasing interest rates in USA.

References
Molly, S. (2018) Walmart Borrows $16 Billion in Second-Largest Bond Sale of Year, i
Retrieved from https://www.bloomberg.com/news/articles/2018-06-20/walmart-is-
selling-bonds-to-finance-flipkart-group-acquisition
Walmart (2018a) Form 10-K, Retrieved from http://d18rn0p25nwr6d.cloudfront.net/CIK-
0000104169/a25e7acb-aa07-49f3-8c0c-0c69e5a8d372.pdf
Walmart (2018b) Form 10-Q, Retrieved from http://d18rn0p25nwr6d.cloudfront.net/CIK-
0000104169/19ce82fe-8a8d-4bdf-abe5-05e06dc4fc49.pdf