Coca-Cola Borrows $5 Billion With Its Biggest Bond Offering Ever

Coca-Cola Co. raised $5 billion in its biggest bond offering ever as the world’s largest beverage company prepares to refinance debt with borrowing costs falling back toward a record low.

The soft-drinks maker issued equal $500 million portions of fixed- and floating-rate securities due in 2016, two $1.25 billion pieces that mature in 2018 and 2020 and $1.5 billion of 10-year bonds, according to data compiled by Bloomberg.

The transaction comes two weeks after the Atlanta-based company reported a 5.9 percent increase in third-quarter profit to $2.45 billion with Chief Executive Officer Muhtar Kent working to raise prices and entice customers to grab a drink on the go. Kent has forecast the company and its bottlers would reach $200 billion in global revenue by 2020, double the amount generated in 2010.

“The company remains on track to deliver on its 2020 vision of doubling revenues,” Edward Mui, an analyst at New York-based debt researcher CreditSights Inc., wrote today in a report that maintained an “outperform” ranking on Coca-Cola bonds. The beverage maker has a “large and diverse international footprint, stable and robust free cash flows, and healthy credit metrics,” Mui wrote.

2010 Sale

Today’s sale exceeds a $4.5 billion offering in November 2010, Bloomberg data show. Proceeds will be used to repay or redeem its $1.25 billion of 0.75 percent bonds due Nov. 15, as well as $1 billion of floaters and $900 million of 3.625 percent notes both maturing in March, Coca-Cola said today in a regulatory filing.

The three-year floaters pay 10 basis points more than the London interbank offered rate, and the similar-maturity 0.75 percent bonds yield 22 basis points more than Treasuries, Bloomberg data show. The 1.65 percent five-year debentures have a spread of 42, the 2.45 percent seven-year securities pay an extra 60, and the 3.2 percent 10-year bonds yield 70 more than benchmarks.

The spread on the 2023 bonds exceeds the relative yield on Coca-Cola’s similar-maturity outstanding bonds as of yesterday by 7 basis points, Bloomberg Valuation estimates show.

Average yields on dollar-denominated investment-grade bonds fell to 3.19 percent yesterday from a more than 19-month high of 3.67 percent on Sept. 5, according to Bank of America Merrill Lynch index data. They reached a record-low 2.65 percent in May and have averaged 5.87 percent during the past two decades.

Coca-Cola is ranked Aa3 at Moody’s Investors Service, an equivalent AA- by Standard & Poor’s and a step lower at A+ by Fitch Ratings. Libor, the rate at which banks say they can borrow from each other, was set at 0.24 percent today.

Bank of America Corp., Deutsche Bank AG, HSBC Holdings Plc and Morgan Stanley helped to manage the sale, the filing shows.

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