June 20, 2011


Fonterra to issue yuan-denominated bond


New Zealand's Fonterra Co-operative Group Ltd announced Friday (Jun 17) it will be the first Australasian corporation to tap the Hong Kong bond market in renminbi currency, with a bond issue denominated in Chinese yuan (renminbi).


The world's biggest dairy company said it would seek to raise RMB300 million (US$42 million) through a bond issue denominated in Chinese yuan deliverable in Hong Kong.


It would be Fonterra's first issued debt denominated in renminbi, said a statement from the farmer-owned cooperative, which is best known for its Anchor brand of products.


Fonterra general manager treasury Stephan Deschamps said the decision to enter the renminbi bond market reflected the growing importance of China to Fonterra's business operations.


"As our business with Chinese customers expands, it makes sense to seek a greater alignment between our treasury borrowing and our business activities," said Deschamps.


The renminbi market had grown significantly over the past year, reflecting the importance of China and its currency in the world economy and trade, he said.


The bond issue represented a diversification in Fonterra debt, which it already has denominated in US dollars, New Zealand dollars, Euros, Sterling and Japanese yen.


Fonterra China president Philip Turner said the funds raised from the bond issue would be used to support the growth of Fonterra's China business, which is based in Shanghai.


"Fonterra is growing very fast in China. We already have an established history working with local customers in China to grow and develop the dairy industry," he said.


"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."


Turner said Fonterra would expand marketing, advertising and distribution of its consumer brands from seven cities to more than 15 cities in China in the next three years.


It was rapidly expanding distribution of its foodservice products into tier-two and three cities in China.


"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.


Fonterra was also developing its farm business in China.


Turner said Fonterra forecasts showed the China dairy market was on track to triple in value from around US$22 billion in 2009 to US$70 billion by 2020.


"Today's announcement is just another step in our broader, long-term investment plans for China," he said.


HSBC is to be the sole bookrunner and sole lead manager for the bond.


"Fonterra is leading the way as a New Zealand corporate in using renminbi for its general corporate funding, and is just one example of the growing number of New Zealand companies using renminbi for business related purposes," HSBC New Zealand CEO David Griffiths said.

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