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Fonterra sets NZ$300 mln bond issue interest rate at 7.75%
Fonterra has announced its issue of 6 year unsecured senior bonds to raise NZ$300 million will offer at least 7.75% when it opens next Monday. This is around double what banks are offering now for term deposit rates.
The A plus rated offer will close on March 6 and Fonterra said it could accept unlimited oversubscriptions. The minimum investment level is NZ$5,000. The interest rate will be finalised on March 9 and will be the higher of 7.75% or the six year swap rate plus a margin of 3.40% on March 9.
The joint lead managers are ANZ and BNZ Capital, while the co-managers are ABN Amro Craigs and First NZ Capital.
Fonterra Chairman Henry van der Heyden said Fonterra intended to use the money for general business purposes, including working capital. He said the offer gave retail investors the opportunity to earn an attractive yield on a fixed-rate investment backed by New Zealand's largest exporter.
* This article was first published yesterday in our daily subscription newsletter for the banking and finance industries. The email costs NZ$365 per annum and carries exclusive news and analysis for New Zealand banking and finance industry executives, regulators and investors. Sign up for a free trial here.
13 Comments
Who the frig has a
Who the frig has a bond issue for this,
Fonterra Chairman Henry van der Heyden said Fonterra intended to use the money for general business purposes,
why not just drop the payout?
They obviously are paying too much for milk, again,storing product and borrowing even more when they already have alarming levels of debt! This dosn't look like a well run company to me. If our Govt looks to be having trouble raising money which appears to be the case,then interest rates will need to climb Id stay short.Fonterra have some issues that need to be dealt with before id invest.
Oh and this from the
Oh and this from the states
POWDER MARKET COMMENTS: Sales continue to be made to the CCC at $.80 per lb (which is said to net
about $.78 per lb to the seller because of the cost to comply with CCC specifications). That inventory, which can
be sold at $.88 per lb has now reached 150 million lbs in four months of sales "“ all by California plants. Plants in
the West are now offering product at the break-even price of $.78 per lb, and the sales are slow. Reports from
Australia say that Fonterra's stocks of skim milk powder are "mountainous," and the European Union has
approved subsidies for exports of the product. And someone representing Leprino, the country's largest cheese
producer, was recently quoted as saying the U.S. is uniquely situated to compete in the international sales arena.
I say, let them do it with their mozzarella.
If my adviser recommended Fonterra's bond Issue id check whats in it for them, why else when dairy prices are falling of a cliff would you want to swim with these guys?
Ineresting things will happen if
Ineresting things will happen if they can't get the cash, and who is going to invest in a company to prop up shareholders and leaders are still in fairy land.
Milk powder down 8.2% this month.
I do know finacial advisors that are going to go for this, they think it's great, I think they are mad!
steve i, why do you
steve i, why do you think they are mad? Fonterra is rock solid (check its recently reissued credit ratings if need be).
Frankly speaking the hysteria surrounding a return to normal prices for milk solids is bizarre.
Look at the rate they
Look at the rate they have to pay, pretty high for "rock solid". Look at its existing debt levels and where they are headed, look at the income streams and where they are going, look at the position they put their share holders in to get this operating capital.
Mitch Sorry your comments do
Mitch
Sorry your comments do not stand up to scrutiny.
It was due for a credit downgrade but was saved by its ability to control the prices it pays its suppliers.This is not a good thing, suppliers own the company and will demand higher prices and then we get the results such as this bond issue. The banks have first call and dont want to lend anymore or Fonterra would not need this issue. We have a problem in one of our major exporters why ignore it?
Dammit - this bond issue
Dammit - this bond issue looked like a sure thing for me before I read everyone's comments!
With all of National's talk of agricultural-export led growth out of recession, I thought that a default would become a political issue, a pseudo govt-guarantee
Basically my question is: is Fonterra an untouchable national champion - too big to fail etc. - OR if it gets in trouble, will it be allowed to die like so many finance companies?
Fonterra may need to be
Fonterra may need to be bailed out by the government in the future, if/when the financial crisis worsens. Then where will these bond holders be?, do they then lose their money. I doubt they will be government guarranteed. They would have to offer over 15% return, due to the high risk, for it to begin looking attractive. It is not as though they are using the money for investment, it will be for running their day to day operations.
Chris read Stephen Hulmes Comments
Chris
read Stephen Hulmes Comments on our Govt T-bills. It looks like we are running into trouble funding our Govt borrowing. Its borrowing before Xmas was 50 mill a week now it is 600mill a week buyers are shying away from tenders.
hence this from Mr hickey, read Stephens comments.
http://www.interest.co.nz/ratesblog/index.php/2009/02/03/video-bill-engl...
Sorry I wouldnt recommend Fonterra.
Heraclitus once said 'If you do not expect the unexpected you will not find it;for it is hard to be sought out and difficult.'
I don't think Fonterra's future will be that unexpected for those in the Know.
NZ Post at least come with a Govt backing.
Chris - Fonterra would indeed
Chris - Fonterra would indeed probably be rescued if it got into trouble. I am not at all sure that the government would at the same time rush to rescue bondholders of Fonterra. After all, they would be left holding all that inconvenient debt, which would then be rendered worthless.
Am I right in thinking
Am I right in thinking that the bond holders are further up the list, squeezing in after the IRD and banks? But before share holders?
Dairy farmers who are cutting back production, looking to cash in shares, may be instead just offered bonds?
Steve, according to Peter R,
Steve, according to Peter R, Fonterra shares are on their books as an asset.If redemption's happen it will affect fonterra's books and turn into a blood bath. Basically they own the company now why should they accept unsecured bonds ,unless all they own now is unsecured shares with a lot of associated debt, most are crying out for cash either way something has to be sold.
After having money in corrupt
After having money in corrupt and misleading finance companies, I wouldn't touch Fonterra bonds with a barge pole. I am sticking with government guaranteed stuff in these uncertain times.