Fonterra Seeks $250 Million in Bond Capital to Support Debt Strategy
Source: DairyNews.today
Fonterra has announced a new five-year, fixed-rate bond issue aiming to raise $250 million, with the option to accept up to $100 million in oversubscriptions. These unsubordinated, unsecured bonds will trade on the New Zealand Exchange (NZX) debt capital market under the ticker FCG060, with the offer closing on November 1. Following closure, the final margin and interest rate will be set, with bond issuance scheduled for November 8.
The bonds, anticipated to carry an annual margin rate between 0.85% and 0.95%, represent Fonterra's preference for bonds over bank financing to cover core funding needs. “Bonds form part of our diversified funding sources and contribute to a prudent refinancing profile,” commented Mark Woodward, Fonterra’s group treasurer. The decision to issue bonds aligns with Fonterra’s strategy of using bank loans for seasonal debt while leveraging bonds for long-term financial requirements.
The funds raised will partly cover the repayment of the maturing $100 million FCG050 bond in mid-November, a component of Fonterra’s diversified debt structure. As of July 31, Fonterra’s total debt stood at $2.6 billion, a reduction from $3.2 billion the prior year, with 60% in bank financing and 40% in market-issued debt, maturing as far out as 2030.
Characterized as “vanilla” bonds in market terminology, FCG060 carries no special features, akin to “blue-chip” investments, providing investors with straightforward access to a sound financial instrument. Fonterra has highlighted its financial stability, citing balance sheet resilience, improved cash flow, and its effective subordination system for milk payments under the advance rate system.
Over the past three years, Fonterra has achieved a “step change in performance,” reducing its net debt by half, signaling a robust commitment to financial discipline and long-term stability.
The funds raised will partly cover the repayment of the maturing $100 million FCG050 bond in mid-November, a component of Fonterra’s diversified debt structure. As of July 31, Fonterra’s total debt stood at $2.6 billion, a reduction from $3.2 billion the prior year, with 60% in bank financing and 40% in market-issued debt, maturing as far out as 2030.
Characterized as “vanilla” bonds in market terminology, FCG060 carries no special features, akin to “blue-chip” investments, providing investors with straightforward access to a sound financial instrument. Fonterra has highlighted its financial stability, citing balance sheet resilience, improved cash flow, and its effective subordination system for milk payments under the advance rate system.
Over the past three years, Fonterra has achieved a “step change in performance,” reducing its net debt by half, signaling a robust commitment to financial discipline and long-term stability.
