Fonterra offers capital notes

By Phil Boeyen, ShareChat Business News Editor

Thursday 25th October 2001

Investors are being given a chance to put money into newly formed dairy business Fonterra - although not directly.

The dairy co-operative is planning to issue up to $200 million of capital notes with an initial minimum interest rate of 7%.

Fonterra's CFO, Graham Stuart, says the notes come with an A+ credit rating from Standard & Poor's and will offer an ongoing income stream at a significant margin over wholesale money market rates.

"They provide an opportunity for non-dairy farmers to invest with New Zealand's largest company. We intend to encourage a liquid secondary market for the notes and want them to be held by investors throughout New Zealand."

As a co-operative, ownership in Fonterra is restricted to New Zealand dairy farmers who supply it with milk. When suppliers reduce the quantity of milk they supply to the company - or cease supplying it altogether - Fonterra intends to surrender shares for capital notes.

"This will allow Fonterra to achieve optimal management of its capital resources on an ongoing basis," Mr Stuart says.

The offer of capital notes will open on November 5th with a minimum application of $5,000. The notes will have no fixed maturity date.

Fonterra Co-operative Group Ltd has shareholders' equity of $5 billion and annual revenue of more than $14 billion. The dairy giant accounts for more than 20% of New Zealand's export earnings and more than 7% of the country's GDP.

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