McDonald's said to offer euro debt as borrowing costs fall

[LONDON] McDonald's Corp is marketing euro bonds, taking advantage of borrowing costs that have fallen to the lowest in a year because of the European Central Bank expanding its stimulus program.

The fast-food chain is offering the securities maturing in January 2021, November 2023 and May 2028, according to a person familiar with the matter who asked not to be identified because they're not authorized to speak publicly.

The ECB's announcement in March that it will add corporate bonds to its quantitative-easing program has driven borrowing costs in the region toward record lows. Investors demand an average yield of 1 per cent to hold euro bonds sold by highly rated companies, compared with 3.16 per cent for similarly rated dollar bonds, according to Bank of America Merrill Lynch Index data.

"At the prices they can issue at today, they'd be mad not to," said Paul Suter, a London-based fixed income trader at ECM Asset Management, an investment team within Wells Fargo Asset Management, which oversees about US$496 billion. "If you look at where credit spreads are, everything is tight right now." Oak Brook, Illinois-based McDonald's couldn't be reached outside of business hours for comment on the sale.

The company, which is investment-grade rated, is marketing the 2021 notes at an initial yield of 70 basis points above benchmark rates, the 2023 notes at a 90-basis point premium and the 12-year securities to pay an extra 120 basis points, according to the person familiar with the deal. Investors demand about 87 basis points above benchmark rates to hold the euro debt of highly rated companies, Bank of America Merrill Lynch index data show.

The maker of Big Mac hamburgers and Chicken McNuggets, which earns about two-thirds of sales outside the US, last sold euro-denominated bonds in May in a 2 billion-euro (S$3.05 billion) offering.

Unilever sold bonds in the single currency on Monday, including some with a zero-per cent coupon.

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