Tesco Cuts Debt Cost With First Dim Sum Bond
This is an informative article on corporate finance from Bloomberg. Here is the opening:
Aug. 26 (Bloomberg) -- Tesco Plc's 725 million-yuan ($113 million) Chinese bond sale costs the U.K.'s largest supermarket chain almost half what its competitors would probably pay to raise money in Europe as it expands into the world's fastest- growing major economy.
The securities, known as dim sum bonds, were sold yesterday at a yield of 1.75 percent, according to a company statement. That compares with yields of 2.96 percent on retail-company debt with an average rating one level higher than Cheshunt, England- based Tesco's, Bank of America Merrill Lynch indexes show.
Tesco joins companies from restaurant chain McDonald's Corp. to construction equipment-maker Caterpillar Inc. in the U.S. in issuing yuan-denominated debt in Hong Kong to take advantage of cheap financing. Investors are eager to deploy the 553.6 billion yuan that official figures show laid in the former British colony's bank accounts at the end of end-June.
"This market gives international borrowers an opportunity to diversify their investor base," said Vishal Goenka, the head of local-currency credit trading at Deutsche Bank AG in Singapore. "Yields are low."
The yield on Tesco's inaugural dim sum bonds is lower than those on its existing, similar-maturity notes in European currencies. The world's third-largest retailer, whose sales growth has lagged behind U.K. rivals, plans to open more than 20 stores in China by year-end, Shanghai Daily reported in July, citing Tesco China Chief Executive Officer Tim Ashdown.
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