Investors are likely to find Fonterra's bond interest rate offer of at least 7.75% an attractive one, according to Forsyth Barr investment adviser Peter Young.
The dairy company yesterday released details of its $300 million unsecured senior retail bond offer, which opens next week.
The money raised will be used for general business purposes and working capital. The offer closes on March 6.
The final interest rate will be finalised on March 9, and chairman Henry van der Heyden said it would be the higher of 7.75% or the aggregate of the applicable six-year swap rate as at that date, plus a margin of 3.4%.
Mr Young said 7.75% was well above what banks were offering, which would make the bonds attractive.
However, Fonterra bonds were a relatively new investment, and Mr Young said the type of investment and the six year term might not suit everyone.
The bonds mature in March 2015, and carry credit ratings of AA- from Fitch Ratings and A+ from Standard and Poors.
Mr Young said Fonterra was a strong financial performer, with total revenue of $19.5 billion and a net profit after tax of $274 million for the 14 months to July 31 last year.
It also had strong brands and its customers, in more than 140 countries, included some of the world's biggest food and nutrition companies. A minimum $5000 investment was required.
Last week, Fonterra's management said it had looked to the New Zealand market for the bond issue because it was cheaper than in other countries, and investors offshore were tending to favour local investments.
The bond offer comes at a difficult time for Fonterra, with close public scrutiny following the write-off of a $200 million investment in Chinese dairy processor Sanlu following the tainted milk scandal, and the sudden decline in its forecast payout to farmers this season from $6.60 a kg of milk solids to $5.10.
The latest forecast was a third lower than last year's record $7.90 a kg milk solids, but many believe it could go lower because of the international credit crunch and buyer backlash at the soaring prices for dairy products last year.
New Zealand finance company South Canterbury Finance Ltd raised $100 million in retail bonds to finance its lending activities, lead manager Forsyth Barr said.
Reuters reports the issuer had a BBB- rating, but investors took up the issue as if it were AAA- rated based on the government's blanket guarantee of retail deposits.
The bonds, with a coupon rate of 8%, mature on October 8 2010, with the company having an option of extending that by a year. There was $25 million worth of over subscriptions.
South Canterbury, founded in 1926, offers business, farm and consumer finance. NZ Post plans to raise $150 million in subordinated notes to repay debt.
The offer, which could take up to a further $50 million in oversubscriptions, is expected to open mid-March and close in mid-April, NZPA reported.
