Bloomberg News

Coca-Cola Bond Sale Includes Notes That Pay Less Than Bank Rate

March 09, 2012

Coca-Cola Co. (KO) sold $2.75 billion of bonds, including short-term notes that pay less interest than an interbank lending benchmark, taking advantage of corporate borrowing costs that are near the lowest on record.

The world’s largest soft-drink maker issued $1 billion each of two- and three-year notes today, as well as $750 million of six-year notes, according to data compiled by Bloomberg. The two-year notes pay a floating rate that’s five basis points less than the three-month London interbank offered rate, the first time a U.S. company paid less than the measure in over a month.

Coca-Cola’s three-year notes have a 0.75 percent coupon, while the six-year notes pay 1.65 percent a year, Bloomberg data show. Libor was set at 0.474 percent today.

Coca-Cola, based in Atlanta, is taking advantage of increasing investor demand for highly rated debt to reduce its borrowing costs. The average yield on investment-grade bonds was 3.45 percent yesterday, near the record low of 3.4 percent reached on March 2, according to Bank of America Merrill Lynch index data.

The soft-drink producer is following competitor PepsiCo Inc. to the bond market. Last month, Purchase, New York-based PepsiCo paid the least interest it ever had on a three-part bond sale, issuing $750 million of 0.75 percent notes due in March 2015, $1.25 billion of 2.75 percent securities maturing in March 2022 and $750 million of 4 percent, 30-year bonds, according to data compiled by Bloomberg.

On Feb. 1, Procter & Gamble Co. issued $1 billion of floating rate notes that pay 8 basis points less than Libor, which is the rate banks say they charge to lend to each other. It was the first to pay less than Libor since 2006.

To contact the reporter on this story: Zeke Faux at zfaux@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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