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Fonterra to issue Renminbi bonds

( First Australasian corporate to tap Hong Kong bond market in renminbi currency
Fonterra Co-operative Group Limited announced today it is seeking to raise 300 million Chinese yuan (approximately USD42 million, NZD56 million) through a bond issue denominated in CNH (Chinese yuan deliverable in Hong Kong).

This marks the first time that Fonterra has issued debt denominated in Chinese renminbi, and the first Australasian corporate to tap the CNH market.

General Manager Treasury, Stephan Deschamps, said the decision to enter the CNH 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.”

The CNH market has grown significantly over the past year, reflecting the importance of China and its currency in the world economy and trade, he added.

Mr Deschamps said the bond issue represents a further diversification in Fonterra’s Treasury strategy. Fonterra already has debt denominated in US Dollars, New Zealand Dollars, Euro, Sterling and Japanese Yen.

Fonterra China President Philip Turner said the funds raised from the CNH bond issue would be used to support the growth of Fonterra’s China business, 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.”

Mr Turner added that Fonterra will expand marketing, advertising and distribution of its consumer brands from seven cities to more than 15 cities in China over the next three years. It is rapidly expanding distribution of its foodservice products into tier 2 and 3 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.”

Fonterra is also developing its farm business in China.

Mr Turner said Fonterra forecasts show the China dairy market is on track to triple in value from around $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 New Zealand CEO David Griffiths says: “This is a milestone transaction for Fonterra and HSBC is delighted to be the Sole Bookrunner and Sole Lead Manager for the first renminbi denominated bond from an Australasian corporate in the Hong Kong Bond Market. 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.”

Media Release on 17 June 2011 from Fonterra (via NZX).



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