December 16, 2016
Bank of China agrees to landmark bank facility with Fonterra
Bank of China has signed a landmark agreement with Fonterra consistent with both organisations' ongoing commitment to building New Zealand's business interests in China.
Bank of China New Zealand and the Co-operative have established a RMB1.5 billion (NZ$300 million) multi-currency bank facility including a Chinese currency component.
It is believed to be the first of its kind in New Zealand, and provides Fonterra with greater flexibility in how it funds its Chinese operations.
Bank of China established a branch in New Zealand two years ago and in that time has demonstrated its support for both Kiwi companies in China, and Chinese firms and investors entering New Zealand.
Chief executive David Lei Wang said annual trade between New Zealand and China had almost tripled to $23 billion since the Free Trade Agreement was signed in 2008, and Chinese banking services played an important role in fostering cross-border transactions and investment.
"We see great opportunities in developing more renminbi (RMB) products and tapping into China's debt capital markets on behalf of New Zealand financial institutions and government agencies," Wang said.
Fonterra's chief financial officer, Lukas Paravicini, said the new debt facility underlined the Co-operative's continued focus on building an integrated business in China.
"Bank of China has strong liquidity in renminbi and its local presence and knowledge offer us additional benefits in the rapidly developing Chinese financial markets," Paravicini said. "Having local funding arrangements is a natural extension of our activities in China. This accord complements the services we receive from our broad range of banks internationally."
The Bank of China facility did not mean Fonterra was taking on more debt, the company says. Rather, it offered the Co-operative alternatives and increased diversity in RMB funding sources, Paravicini explained. "There is no change to our existing strategy of growing our business in China. This is simply a better way to organise the funding of that strategy."