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Carlsberg CEO has a warning for his peers about negative rates
THE man running Carlsberg A/S says he won't be "seduced" by negative interest rates as others take advantage of historically cheap credit to pay for expansion.
Cees 't Hart, the chief executive officer of the Danish brewer, says the worry is that companies that succumb to the temptation to issue debt just because it's cheap could end up with balance sheets they can't afford.
"The moment you get seduced by low rates and companies feel like they have to use them to do very big things - maybe bigger than they can absorb - they have to remember they all have to pay the bill later," Mr Hart said in an interview. "There are many companies that have been a lot more aggressive than we have who have then gotten into problems afterwards."
Globally, almost US$17 trillion of bonds now trade at negative yields as investors have fled risk.
Nestle SA on Aug 13 became the first company to have 10-year euro debt yielding below zero.
In Carlsberg's home country of Denmark, which has the world's largest covered-bond market, a bank made history this month when it offered the first ever 10-year mortgage at a negative rate.
Since Mr Hart joined Carlsberg in 2015, the company has focused on cutting its debt and reducing costs, a strategy that has included abstaining from major acquisitions.
Meanwhile, competitors like Anheuser-Busch InBev NV have gained market share after a series of big takeovers over the past decade.
The last time Carlsberg spent a large sum on a takeover was when it bought Scottish & Newcastle plc in 2008 for roughly US$8.5 billion, under Mr Hart's predecessor.
While Mr Hart won't pursue large takeovers at the moment, he said he's still interested in increasing Carlsberg's stake in Hanoi-based Habeco. Talks with the Vietnamese government have been on for some years now. BLOOMBERG