idpickering wrote:Diageo launches and prices $1.7 billion USD bonds.
Diageo, a global leader in beverage alcohol, yesterday launched and priced a $1.7 billion SEC-registered bond offering, consisting of $800 million 5.375% fixed rate notes due 2026 and $900 million 5.625% fixed rate notes due 2033.
The issuer of the bonds is Diageo Capital plc, with payment of principal and interest fully and unconditionally guaranteed by Diageo plc. Proceeds from this issuance will be used for general corporate purposes. The bond offering is scheduled to settle on 05 October 2023.
BofA Securities, Deutsche Bank Securities, RBC Capital Markets and Standard Chartered Bank acted as joint active book-running managers on this offering.
https://www.investegate.co.uk/announcem ... ds/7792349Ian (No holding).
I’ve been looking at Diageo today and one thing I’m always wary of is debt, particularly with higher interest rates. The credit rating is A3 with Moody’s and has been since 2005. There’s no doubt it’s a high quality company but the current IFRS debt is substantial at 2.75x Net Debt/EBITDA. As such, I thought it worth comparing the recent debt issuance announcement (above) with a very similar one from October 2022 (below):
Diageo, a global leader in beverage alcohol, yesterday launched and priced a $2.0 billion SEC-registered bond offering, consisting of $500 million 5.200% fixed rate notes due 2025; $750 million 5.300% fixed rate notes due 2027 and $750 million 5.500% fixed rate notes due 2033.
The issuer of the bonds is Diageo Capital plc, with payment of principal and interest fully and unconditionally guaranteed by Diageo plc. Proceeds from this issuance will be used for general corporate purposes. The bond offering is scheduled to settle on 24 October 2022So, amazingly the interest rate on 3 year debt has only increased from 5.200% to 5.375% and that on longer term (10/11 year) debt from 5.500% to 5.625%. in the meantime the Fed funds rate has increased from 3% to 5.33% and the 10 Yr US Treasury is now yielding 4.92%. Seems that continued debt financing is not an issue for Diageo!
All the best, Si