HG bonds: Kimberly-Clark places 2031 notes after earnings miss; terms

Kimberly-Clark Corp. today completed a $600 million offering of 2% 10-year notes due Nov. 2, 2031, at T+48.

Proceeds will be used for general corporate purposes, according to regulatory filings.

The Irving, Texas-based consumer products company on Oct. 25 reported headwinds from rising inflation and ongoing supply-chain issues in its third quarter. It released earnings of $1.62 per share, shy of S&P Capital IQ consensus estimates for earnings of $1.65 per share. Revenue of $5.01 billion was firm versus the $4.98 billion consensus, however.

Earlier today, S&P Global and Moody's assigned respective A/A2 ratings to the new bond placement and noted that the proceeds could be used for the repayment of commercial paper.

Yesterday, Ratings affirmed its A profile, and revised the outlook down to negative, from stable, noting that record input cost inflation and supply-chain disruptions could prevent the company from improving profits and restoring credit ratios consistent with its current rating.

Today, the agency noted that the company lowered its 2021 guidance for the second time in three months. It projected S&P Global Ratings-adjusted leverage rising to about 2.5x as of year-end 2021, or above its low 2x area downgrade trigger. "We believe it is likely that many of the headwinds Kimberly-Clark is facing will persist well into 2022. We nevertheless assume that the company will be able to offset these numerous headwinds over the next two years by raising prices, realizing productivity savings, and benefitting from a rebound in North American tissue demand," the agency stated.

Moody's continues to maintain a stable outlook on its A2 rating. However, it noted today that inflationary pressures could lead consumers to "trade down" to cheaper, lower-margin products or to private labels. It also said the company's "track record of aggressive shareholder distributions, which has included spin-offs and debt-funded share repurchases, increases the risk that capital will continue to be extracted from the company."

The Irving, Texas-based consumer products company is a regular visitor to the market but had not placed a deal so far this year. In September 2020, Kimberly-Clark printed $600 million of 1.05% seven-year senior notes due Sept. 15, 2027, at T+58.

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