KEY POINTS:
Fonterra's renewal of a US$2 billion European debt facility puts the dairy giant in a sound financial position to expand its presence in developing markets such as China, says co-operatives expert Alan Robb.
Fonterra yesterday issued an updated prospectus for the Euro Medium-Term Notes it trades on the Luxembourg Stock Exchange in what directors said was a rollover of an existing financial arrangement.
"It's business as usual," Fonterra director Stuart Nattrass said.
Robb, who in the past has criticised the impact of Fonterra's policy of total payout on its ability to raise capital, said the measure gave Fonterra the ability to access funds for further expansion abroad.
"It is a fair indication that as a co-operative they are able to raise finance through borrowings without difficulties," says the former Canterbury University professor who now teaches at St Mary's University in Halifax, Canada.
In a bid to boost milk production and ensure security of supply for its international customers, Fonterra has expanded in the developing world, in the form of joint ventures in places such as South America and China.
"They're wanting to expand there [China] so a prudent thing would be to ensure they've got finance available from one of the traditional sources," Robb said.
"They are clearly setting up a financial arrangement that's likely to be something they will draw on in the future."
The move comes two months before Fonterra is due to announce the results of its capital structure review, with many commentators speculating a partial listing on the NZX is possible.
