In this section
Offers for readers
The comment stream
Recent comments
- 1 of 8673
- ››
Editors choice
- 1 of 47
- ››
The news stream
Latest news
Most commented
- RBNZ hikes, but softens outlook 233
- Wednesday's Top 10 with NZ Mint 92
- Business confidence falls again 82
- Thursday's Top 10 with NZ Mint 66
- 90 seconds at 9 am with BNZ 62
- Dear John: 'Be careful what you wish for' 37
- 90 seconds at 9 am with BNZ 15
- Yellow Pages bidders offered loans 10
- The "Archilles heel" of dairying - effluent control 8
- No quorum for lender's meeting 7
Most viewed
Interest on Twitter
Fonterra plans to raise NZ$300 million through retail bond issue run by BNZ, ANZ National
Fonterra has announced plans to raise NZ$300 million through a senior retail bond issue that will be joint lead managed by ANZ National and BNZ Capital.
It has not detailed the likely interest rate or maturity, but said it was expected to open in early February. Fonterra said it planned to use the money for general business purposes.
This bond issue is the latest in a slew of corporate and local government retail bond issues that are designed to take advantage of increased demand for investors looking for higher yields from big corporate names than the plummeting rates offered by banks. It is also giving these corporate bond issuers another avenue, given pension fund demand has dried up in the rush to put money into guaranteed bank accounts.
* 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.
12 Comments
It may be raising it
It may be raising it to pay interest costs on the rest of its borrowing.
Personally when I have invested
Personally when I have invested in bonds in the past I have not appreciated seeing this rationale for the fund raising:
''it planned to use the money for general business purposes''.
That has always sounded to me as funding day to day expenses. Tell me your going to use it for strategic acquisitions or growing the company but dont tell me you are going to be using it for general business purposes........
One assumes the government would bail out Fontera if they get into trouble, but where would bond holders come in the queue?
Once you understand the implications
Once you understand the implications of product going into storage then you can begin to see the possible outcomes, all of which are frightening.
Now Fonterra will start consuming itself in a self defeating spiral down into some from of taxpayer funded restructuring/bailout. The reality is that if you could short its shares or they where listed then it would have troubles. Its shares are over valued its played the game of paying high prices for Executives, who then go on borrowing sprees and if it goes wrong you borrow more. The classic example of this is David Kirk at Fairfax.
http://londonbanker.blogspot.com/2008/12/re-post-from-230508-capital-ist...
I have no doubt that in our debt based money system the central bankers always thought that they could inflate their way out of a debt crisis and the people who borrowed would benefit at the cost of the savers and workers. But like all things eventually we reach peak credit and only repudiation of debt is a way forward. This is why deflation scares the central bankers its a loss of control. The days of borrowing money into existence may be coming to an end, I dont know what will replace it , do you?
http://market-ticker.denninger.net/
Andy, You hit the nail
Andy,
You hit the nail on the head. I am always amazed by the extreme focus by so many on yield, when really, the name of the game for now is preservation of your capital at any cost. The actual real future benefit of preserving what you have now into the next 2-3 years will far outweigh any return you are likely to get on any form of investment right now. That is when you consider deflation of values (currencies, shares, property, you name it) as simply an inevitable part of the current massive correction going on.
The milk problems continue http://www.stuff.co.nz/4797088a13.htm
The milk problems continue
http://www.stuff.co.nz/4797088a13.html
Andrewj Bravo. Raising money to
Andrewj
Bravo.
Raising money to meet the interest bill encapsulates the dilemma in which we are all entwined. The joys of compound interest climbing the parabolic curve.
Where do they think those able to pay exist?
Don't forget Fonterra just settled
Don't forget Fonterra just settled a pay increase with workers: A 1.5% cash payout plus 6.5% pay increase, then for the next 2 years increases of the CPI + 1%.
Turkeys can vote for an early Christmas, but heads need to roll.
PeterR Its our own Ponzi
PeterR
Its our own Ponzi scheme. After all its only money, and the shareholders are happy so long as they get record payouts, they are as bad as the Hanover investors. Happy days are back.
In the long-term Ferrier is
In the long-term Ferrier is interested in wresting control away from the farmers. To do this all he need do is default on the bond issue, drive the stock price down, and arrange a group to do a takeover.
Sorry false alarm. Im wrong
Sorry false alarm. Im wrong 300 million wont pay the interest. Last year debt was 6.8 billion must be over 7billion by now so this is just small change.They need more like 7 or 800 million for interest. The good news is, that as a Co-op the suppliers can always get less and Fonterra can trade its way out, oh I forgot the suppliers own the company.
Doug Even better get it
Doug
Even better get it down to negative equity,then he could buy it himself.
Andy, It was known at
Andy,
It was known at the time that the formation of Fonterra was a solution to dairy industry problems that couldn't and wouldn't work for long. The decision was a political one, a monumental mistake, and one for which I hope Helen Clark is remembered.
The Fonterra model has failed and is not fixable. A completely new model is needed. Forget market power - it was never there. There is no point in attempting to bail out the long term survival of a failed model. Fonterra is already subsidised by the NZ public.
An effective dairy processing industry is critical, but Fonterra is not too big to fail. The processing plants and skilled staff aren't going to disappear. Government and dairy farmers should be starting to think about how to break Fonterra into smaller, more effective units, and who may be willing to purchase them.
Post new comment