Fonterra debt issue in demand

The company has issued €500 million (NZ$1,018 million) of Eurobonds under its recently established Euro Medium Term Note programme and says the funds will be used to retire maturing commercial paper.

Group controller, Bryce Houghton, says short-term debt had been used extensively through the dairy industry merger process and the company was now reducing its liquidity risk by extending its debt maturity profile.

Fonterra says that heavy demand for the bonds from Europe and Asia indicates there is widespread confidence in the company, despite its name being new to investors and a tight issuing margin.

The bonds are for a five-year term and will pay a fixed coupon rate of 5.25%. The debt issue and the company is rated AA- long term from Standard and Poor's and Fitch rating agencies.

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