Coca-Cola Sets Euro Deal Record for U.S. Firms in Bond Stampede

Coca-Cola Co. sold 8.5 billion euros ($9.52 billion) of bonds in euros, the biggest sale by a U.S. issuer and extending this week’s surge in euro borrowing by American companies to an all-time high.

The world’s largest soft-drink maker capitalized on record-low borrowing costs to the notes maturing between two and 20 years, according to a person familiar with the matter who asked not to be identified because they aren’t authorized to speak publicly. The deal boosts this week’s euro sales by U.S. borrowers to a record 14.6 billion euros, according to data compiled by Bloomberg.

Coca-Cola joins American firms including Oreo maker Mondelez International Inc. in raising funds in Europe as central bank stimulus drives down benchmark rates relative to the U.S., where policy makers are withdrawing support. U.S. borrowers have sold 27.4 billion euros of debt this year, the most for the period since 2007, according to data compiled by Bloomberg.

The deal is the largest ever by a U.S. issuer in euros, and the second largest corporate deal in the single currency since Roche Holding AG’s 11.25 billion euros in 2009, according to Brendan Hanley at Bank of America Corp. in New York, one of the arrangers on the deal.

“The sale attracted an extraordinary amount of investor demand with an order book in excess of 20 billion euros,” Hanley, the co-head of Americas investment-grade capital markets at Bank of America, said by phone.

Lowest Rates

Coca-Cola sold 2 billion euros of two-year and 4 1/2-year notes, and 1.5 billion euros of eight-year, 12-year and 20-year bonds, the person said.

Petro Kacur, an Atlanta-based spokesman at Coca-Cola declined to comment on the sale beyond documents about the sale on its website.

“It’s completely unprecedented, rates have never been this low,” Jon Brager, a London-based credit analyst at Hermes Investment Management Ltd., which oversees $45 billion, said before the bonds were sold. “Quantitative easing from the European Central Bank and the general macro environment within Europe, still mired in this recession, have pushed rates down,” he said referring to ECB bond-buying stimulus.

Investors are demanding an average 0.89 percent yield, the lowest on record, to hold investment-grade corporate debt in the single currency, according to Bank of America Merrill Lynch index data. That compares with an average yield of 3 percent for bonds in dollars, the data show.

‘No Brainer’

“Funding in the euro market is very cheap for these companies,” said Alain van der Heijden, a fund manager at Kempen Capital Management in Amsterdam, which has about $3.3 billion of credit under management. “I definitely expect more to come. It’s a no-brainer with yields so low.”

The issue follows Mondelez’s sale yesterday of $2.97 billion of notes denominated in euros and pounds. The company, which also makes Ritz crackers and Milka chocolate, sold 500 million euros of 1 percent notes, 750 million euros of 1.625 percent securities and the same amount of 2.375 percent bonds, according to data compiled by Bloomberg.

Priceline Group Inc., the largest U.S. online travel agent, issued 1 billion euros of 1.8 percent bonds on Monday.

The cost to U.S. companies of swapping the proceeds from euro sales back into dollars has more than halved since the euro-area debt crisis in 2012.

The price of converting the funds using the five-year cross-currency basis swap is 0.32 percentage point below the euro interbank offered rate, from 0.67 percentage point below Euribor in 2012. Even so, the cost has risen from the start of the year.

“The use of the basis swap by companies issuing in euros has driven the cost slightly higher,” said Bloomberg First Word strategist Simon Ballard. “Still, with yields so low in euros, it makes sense to issue in Europe and use the swap.”

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