Home Depot Issues $2 Billion of Debt to Buy Back Shares

Home Depot Inc. (HD), which signaled three weeks ago that it’s optimistic about the U.S. housing recovery, borrowed $2 billion with a bond sale that may fund share repurchases.

The nation’s largest home-improvement retailer issued equal portions of five-year, 2 percent notes and 4.4 percent debentures due in 2045, according to data compiled by Bloomberg. Proceeds will be used for general corporate purposes including stock buybacks, Atlanta-based Home Depot said in a regulatory filing.

Home Depot shares have underperformed the broader market this year, handing investors a 1 percent loss while the Standard & Poor’s 500 index rose 6.5 percent. The company repurchased $1.25 billion of stock in the first quarter. Today’s transaction may leave Home Depot with about $22 billion of adjusted debt, S&P analysts led by Andy Sookram wrote in a report that rated the new bonds A.

The company’s five-year securities yield 0.4 percentage point more than similar-maturity Treasuries, and its 2045 notes pay an extra 1.05 percentage points, Bloomberg data show. The rates were about the same as borrowing costs for similarly graded issuers whose businesses cater to discretionary consumer spending, the data show.

The retailer blamed lackluster first-quarter revenue on the harsh winter, not a slowdown in the housing market. Sales gained 2.9 percent to $19.7 billion, according to a May 20 company statement. Analysts on average estimated about $20 billion.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net John Parry, Chapin Wright

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