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McDonald's biggest euro bond sale extends record draw from US

Tuesday, May 19, 2015 - 07:14
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McDonald's Corp sold 2 billion euros (US$2.3 billion) of bonds, its biggest offering in the single currency.

[LONDON] McDonald's Corp sold 2 billion euros (US$2.3 billion) of bonds, its biggest offering in the single currency.

The world's largest restaurant chain sold notes maturing in 2019, 2022 and 2027, according to data compiled by Bloomberg. It cancelled a plan to issue bonds due in 2035 as part of the sale, according to a person familiar with the matter who asked not to be identified because they're not authorised to speak publicly.

US borrowers from BlackRock to Coca-Cola have issued a record 49.8 billion euros of bonds this year, more than double the 22.5 billion euros sold in the same period of 2014, data compiled by Bloomberg show. The companies are taking advantage of lower borrowing costs in the region compared with the US, with average yields on investment-grade bonds in euros almost two percentage points lower than those in dollars, according to Bank of America Merrill Lynch index data.

"I would expect this trend to continue at least until summer," said Oliver Woyda, a money manager who helps to manage 8.3 billion euros of corporate bonds at Deka Investment GmbH in Frankfurt. "A lot of the money will be used for share buybacks and dividends, a very cheap way to finance such spending, which is attractive for the companies. As long as the demand is there, they will keep on doing this."

London-based officials at McDonald's weren't immediately able to comment on the sale.

McDonald's may raise about US$4.5 billion to help fund share repurchases, Standard & Poor's said May 4. The ratings company lowered its credit ranking one level to A-, its seventh-highest grade.

Oak Brook, Illinois-based McDonald's is seeking to boost profitability after reporting last month that U.S. sales fell for a sixth quarter. Steve Easterbrook became chief executive officer in March.

The sale included 600 million euros of floating-rate notes due in 4 1/4 years that will pay a premium of 30 basis points above euro interbank offered rates, according to the data.

McDonald's also sold 800 million euros of securities maturing in seven years paying a yield premium of 55 basis points more than benchmark rates, the data show. Also included in the sale were 600 million euros of 12-year notes that yield 1.882 percent, the data show.

The company cancelled a plan to sell 300 million euros to 500 million euros of 20-year bonds, which it was marketing at a yield premium of 110 basis points over benchmarks rates, according to the person familiar with the matter.

McDonald's hired Bank of America Corp, Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley, the data show.

United Technologies Corp, the US maker of Otis elevators, Pratt & Whitney jet engines and Carrier air conditioners, sold its first bonds in euros, according to the data. The 750 million euros of notes maturing in eight years were priced with a yield premium of 57 basis points above benchmark rates.

The average spread over benchmark rates demanded to hold investment-grade debt in euros was 69 basis points, according to Bank of America Merrill Lynch indexes.

Simon Property Group Inc is also planning to join US sellers taking advantage of lower borrowing costs in the euro area. The Indianapolis-based real estate investment trust hired banks to arrange investor meetings starting May 26, according to a person familiar with the matter. The sale would be its first since a debut euro sale in 2013, according to Bloomberg data.

BLOOMBERG

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