Fonterra looks to investors for funds

Manawatu/Rangitikei Fed Farmers VP Andrew Hoggard says Fonterra's announcement it is considering raising $300 million won't affect dairy farmers, but he is worried the co-operative is raising capital to pay the bills. Fonterra said in February it expects to offer senior retail bonds, with the ability to accept oversubscriptions. The co-operative said it intends to use any money raised for general business purposes, including working capital requirements. An investment advisor with ABN- AMRO Craigs in Palmerston North, Andrew McLean, said he believes Fonterra will be looking for money so it can diversify its borrowing."Because of the international credit crunch, it's getting harder to raise money through banks, and is more expensive as well. This is Fonterra looking to borrow money from other sources," he said. He expected the cooperative to get money from some institutional investors, as well as smaller Mum and Dad type investors. "Raising money through these sorts of bonds is not unusual. We've seen ones recently from PGG Wrightson, Transpower, and Wellington airport has one out at the moment. Auckland city has indicated it is doing the same thing next year," Mr McLean said.Fonterra has an strong credit rating, which will make it an attractive investment to some people. It will also impact on the amount of interest the cooperative has to pay, he added. .But Mr Hoggard said although concerned about the $300 million, there are other worries for dairy farmer shareholders. "We have heard that all Fonterra's storage is full, meaning it is stockpiling product. That means it's not selling." He said these are worrying times for all farmers. "There will be serious belt tightening in the coming year as dairy farmers cope with the lower payout and have less money to use for any spending.