Fonterra has borrowed 1.25 billion Chinese renminbi (about NZ$250 million) through a five-year bond issue that will pay investors interest of 3.6% per annum.
The co-operative says the money raised through the “dim sum” bond issue, or Chinese renminbi raised offshore, will be used to strengthen and support the growth of Fonterra’s businesses in China. Fonterra says the bonds were bought by global institutional investors, with a sizeable chunk of them from Asia. The bond issue was managed jointly by HSBC and Citibank.
The bond issue is Fonterra's second one denominated in renminbi.following one in June 2011. The earlier issue saw Fonterra borrow 300 million renminbi (about NZ$56 million) in Hong Kong. Fonterra touted itself at the time as the first Australasian corporate to tap the Hong Kong bond market in renminbi. That three-year issue is due to mature in June this year and was priced at 1.1%, which Fonterra said was the lowest coupon then achieved for an international corporate issue in the Chinese yuan deliverable in Hong Kong market.
Of the new bond issue Fonterra's chief financial officer Lukas Paravicini said money raised will be used for Fonterra’s businesses in China.
“Along with refinancing some of our existing China operations, we will also be using funds to support further growth in this market. This will include the further expansion of our consumer, foodservice and farming operations,” Paravicini said.
Here are some further comments from Fonterra
Fonterra President Greater China & India, Kelvin Wickham, said the co-operative has had a strong focus on driving growth in both volume and value as it develops its integrated business model in China.
“Last year we successfully launched our premium milk brand, Anchor, and also launched a new paediatric formula product specially tailored for the China market under the Anmum brand.
“At the same time China is expected to see a continued gap between the demand and supply of raw milk so our farming business will continue to build supplies of quality raw milk to meet local consumer demand.
“Our well-established foodservices and ingredients businesses, which import quality products from New Zealand, are also expecting to see continued growth in the coming years.
“The renminbi bond issue will support the growth of our whole business, and in particular our consumer brands business which are a key focus for growth given it is at an earlier stage of development,” Mr Wickham said.
Mr Paravicini added that the decision to issue the dim sum bonds is part of Fonterra Treasury’s diversified funding strategy. This comprises a combination of bank facilities and debt capital market bonds, which currently includes bonds denominated in New Zealand Dollars, Australian Dollars, US Dollars, Renminbi and Sterling.
“The dim sum bond market has continued to develop strongly over recent years and provides an attractive opprotunity for us to raise long term renminbi funding that matches our businesses in China. As this funding market and our business in China develop further, it makes sense to seek a greater alignment between our treasury borrowing and our business activities,” Mr Paravicini said.
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