Post-deal insights: Coca-Cola gives nod to Australian dollar investors following Kangaroo debut

Friday, 03 June 2016

The Coca-Cola Company (Coca-Cola) credits the support it received from local and regional Australian dollar investors for the pricing and volume success of its debut Kangaroo transaction. The issuer printed A$1 billion (US$722.6 million) on June 1, across four- and eight-year maturity tranches.

Lisa Myers, Coca-Cola's Atlanta-based director, financial markets, says the borrower was impressed by Australian dollar investors' willingness to engage on the basis of global-equivalent pricing. Buy-side sources have told KangaNews that the Coca-Cola deal printed with a slight new-issue premium but there seems to be no suggestion of a significant discount given to Kangaroo buyers.

"When we met with investors on our roadshow last March we enquired as to what they were looking for in terms of investments – we try to be as flexible as possible in each market – but we never heard a specific need to issue at a discount in order to create interest in our transaction, just a preference for certain tenors," Myers reveals. "The result was very positive – we feel that we received excellent support in this transaction from local investors and the broader region."

She continues: "As a global issuer, we think it's important both for the company and for investors that our pricing is consistent across markets. There are bound to be small discrepancies, but investors are sophisticated enough to see the relative pricing across our global curve."

Establishing a rational price point was clearly important to Coca-Cola – not least because it wants to make Australian dollars a repeat issuance currency. To some extent, therefore, deal size was a secondary concern.

Myers explains: "Our objective was around A$1 billion – but we intend to build out a curve in Australian dollars so we weren't overly concerned with launching a huge transaction. We were more interested in establishing a fair price. With the Kangaroo programme now in place it is very simple for us to launch more transactions, and with the success of this week's deal we will definitely plan to do so."

Diversification plan
The Australian debut was part of a long-term global plan to diversify funding on the part of Coca-Cola. Myers says the company started considering non-US funding markets in 2014 as its cash position and debt complex had both grown considerably – and have continued to do so. Australian and Canadian dollars, euros, sterling, Swiss francs and yen are all on the table.

Coca-Cola entered the euro market in late 2014 and returned for a second transaction early last year. It also issued Swiss francs for the first time last year, after which Myers says the company "began focusing on an Asian and Australian roadshow".

In this context, Myers reveals, the Kangaroo debuts of global corporate names like Apple and Intel Corporation – both which first came to market in the second half of 2015 – acted as no more than a confirmation of the Australian market's validity.

"It's always helpful to see the evidence of a healthy market, but we had Australia on our list before these issuers came to market," she tells KangaNews. "It was, and continues to be, important to us to meet with investors face-to-face, share our story and explain our intentions before launching a transaction. This commitment to investors worked well for us across Europe, and I think proved to be important again on this Kangaroo issuance."

Coca-Cola clearly believes that on-the-ground engagement is the best way to maximise a new market's diversification benefit – and this also led to the decision to issue Australian dollars in Kangaroo rather than global format. KangaNews understands the issuer achieved its goal of significant domestic-investor participation, especially in the four-year tranche of its Kangaroo debut.

"We made the decision to create the AMTN programme, rather than issue from our Securities and Exchange Commission-registered shelf, specifically to reach Australian investors. The big, global investors have many opportunities to access our bonds in the US and, while we are happy to have them participate [in the Australian dollar deal], the goal was to get bonds into the hands of investors who don't or can't participate in the global deals," Myers confirms.