Fonterra Raises $75 Million From NZ Institutions

Fonterra Raises $75 Million From New Zealand Institutions

Fonterra Cooperative Group Limited has raised debt from the New Zealand wholesale capital market for the first time with a $75 million medium-term notes issue. The funds will be used to retire short-term debt and extend the Company’s debt maturity profile.

The $75 million includes a $25 million oversubscription provision which the Company took up in response to excellent demand from local fund managers and other institutional investors, following last week’s presentations to the financial community.

The issue of three-year senior, unsecured, unsubordinated notes, maturing November 29, 2005, closed on Tuesday 26 November. The coupon rate of 6.33 per cent, 18 basis points above the three-year swap rate, was set yesterday. Final settlement date is tomorrow. The notes are not available for subscription by the public.

Fonterra Chief Financial Officer Graham Stuart said the notes issue, which represents the domestic debut of the Company’s medium-term notes programme, does not mean Fonterra has acquired extra debt.

Instead, the issue signifies another milestone in the Company’s ongoing path to a more effective debt profile.

“As we have indicated to our farmer shareholders, we are gradually moving from a reliance on short-term borrowing to a more prudent balance of long-term borrowing,” said Mr Stuart.

Short-term debt had been used extensively through the dairy industry merger process and Fonterra was now reducing its liquidity risk by extending its debt maturity profile.

Fonterra Group Treasurer Mary-Jane Daly said the issue had attracted strong interest from local investors, and the decision to take up the $25 million oversubscription provision was easily made.

“This is the first time we’ve raised money from the New Zealand wholesale market and we’re delighted with the result. All parties are pleased with the pricing of the issue and Fonterra remains keen to access the local market as much as possible,” said Ms Daly.

Westpac Institutional Bank arranged the issue and was joint lead manager alongside The National Bank of New Zealand Limited.

The medium-term notes programme, and Fonterra itself, have long-term credit ratings of AA- from both Standard & Poor’s and Fitch Ratings.

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