There is mounting speculation Fonterra is about to announce a bond issue in Australia and Fonterra yesterday confirmed it is looking further afield to a possible yuan denominated bond issue in China. Craigs broker Peter McIntyre said yesterday: "If Fonterra is looking to expand into countries of origin, such as China, then it makes sense to raise funds locally," he said.
By having bond issues overseas, Fonterra would be decreasing its risk in foreign exchange exposure and hedging.
A Fonterra spokesman contacted yesterday said while the company had sought ratings from international credit ratings companies, "there has been no decision made on whether to go ahead", with either an Australian or Chinese bond issue.
Similarly, there was no decision on a timeframe or what level of investment might be sought from either market.
Fonterra was spending this month considering the potential for an issue in China, via the Hong Kong stock exchange, the spokesman said.
Last week, international rating agency Standard and Poor's assigned A+ long-term and A-1 short-term debt ratings to the unlimited Australian-dollar debt-issuance programme of Fonterra.
Agency Fitch Ratings has said it expected to give Fonterra a AA- rating if it took a bond issue to market, Mr McIntyre said.
Fonterra has about $1.052 billion issued on the New Zealand debt market, in perpetual and fixed rate bonds with a variety of maturity dates. These were released in three tranches of $102 million, $150 million and $800 million.
Mr McIntyre noted for the $800 million tranche, initially only $300 million was sought, but it was "massively oversubscribed" by $500 million.
"If there's an issue then it's likely to get good investor demand," Mr McIntyre said.
