Fonterra says it will be the first Australasian corporate to tap Hong Kong bond market in renminbi as it seeks to raise 300 million Chinese yuan (NZ$56 million) through a bond issue.
"This marks the first time that Fonterra has issued debt denominated in Chinese renminbi, and the first Australasian corporate to tap the CNH (Chinese yuan deliverable in Hong Kong) market," Fonterra's Treasury general manager Stephan Deschamps said.
The decision to enter the market reflected the growing importance of China to Fonterra.
“As our business with Chinese customers expands, it makes sense to seek a greater alignment between our Treasury borrowing and our business activities.”
Fonterra already has debt denominated in the New Zealand dollar, US dollar, Euro, British pound and Japanese yen.
The money raised will be used to support the growth of Fonterra’s China business, which is based in Shanghai.
“We see huge potential to expand the breadth of products we offer in China, as well as the geographical distribution of our consumer brands and foodservice dairy products,” Fonterra China president Philip Turner said.
He said Fonterra plans to expand marketing, advertising and distribution of its consumer brands from seven cities to more than 15 Chinese cities over the next three years.
“We are also exploring opportunities to produce and sell a range of premium value-added dairy ingredients for key customers on the ground in China," said Turner.
The dairy cooperative is also developing its farm business in China.
Turner said, based on Fonterra forecasts, the Chinese dairy market is expected to triple in value from about US$22 billion in 2009 to US$70 billion by 2020.
HSBC is the book runner and lead manager for Fonterra's bond issue.
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