Global fast food chain McDonald's is known for flipping its burgers in China, where it has 1000 restaurants. Yet last week it offered up something even juicier than a Double Cheeseburger: RMB200 million ($29 million) of three year notes. The deal was the first time a foreign company had issued renminbi-denominated bonds in Hong Kong and commentators are already heralding the move as the start of a new trend.
The so-called Panda bonds--bonds issued in renminbi in China by foreign companies--have been spoken of for while. The Chinese are keen for them to happen as they strengthen Hong Kong as the centre of this kind of issuance, while also allowing for more internationalization of the Chinese currency.
Banks HSBC of the UK and UFJ of Japan have both issued these bonds in 2009 and earlier this year, respectively. And Wal-Mart has said that it is keen to look at doing an issue this year as well. McDonalds thus sets the corporate benchmark.
The notes carry a coupon of 3 percent but the price and yield are not known as they were placed with a small group of investors by lead manager Standard Chartered. They are rated A by Fitch.According to McDonald's spokeswoman Lisa Howard, the proceeds will go towards general working capital within China, where the company is going to open 175 new restaurants this year. By financing this expansion locally with medium term, cheap debt, McDonald's is mitigating its currency risk, while also matching its assets and liabilities. As an exercise in corporate finance, I'm lovin' it.