June 13, 2011

Fonterra experiences debt in Australia

Fonterra is getting ready to issue debt in Australia for the first time, with Fitch Ratings declaring it expecting to give the giant dairy co-operative a rating of AA-minus when it steps into the market.

The Fitch rating has an expected rating because Fonterra does not at this time have an offer for Australian debt in the market, although the Fitch rating confirms it will rank with senior unsecured debt.

A spokesman confirmed Fonterra had not previously offered debt to Australian investors, where the New Zealand farmer-owned dairy co-operative has substantial holdings in both farms and dairy product processing and marketing.

Investor appetite for Fonterra bonds has been strong in New Zealand. A February 2009 issue seeking NZD350 million (US$286 million) was more than twice over-subscribed and attracted NZD800 million (US$653 million). The co-op is also considering raising yuan-denominated bonds to fund Chinese investments, in what appears to be a strategy to hedge borrowing for in-country activity by avoiding foreign exchange risk exposure.

"The net proceeds from the issues under the programme will be for general corporate purposes," Fitch said.

The rating will be confirmed when full documentation has been received.