Coca-Cola to lift reverse Yankee debt by promoting €1 billion of Euro debt

The corporate, which sells its eponymous drink just about in each a part of the world, has been in a long-drawn dispute with tax authorities within the U.S. over a $16 billion cost that it may probably owe. 

Whereas the total quantity hasn’t come due but, Coca-Cola is getting ready for the potential value by promoting €1 billion in new debt, the Monetary Instances reported Thursday.

The beverage firm mentioned final week that it’s getting ready to pay $6 billion over unpaid taxes and curiosity about 15 years in the past following a U.S. tax court docket ruling. 

Coca-Cola plans to concern two €500 million bonds and apply the proceeds to “potential funds” in its dispute with the Inside Income Service (IRS). 

The corporate’s “reverse Yankee” transfer, whereby U.S.-based firms increase cash in Euro or Sterling bond markets, has change into extra widespread amongst firms searching for debt financing avenues. It permits American firms to reap the benefits of central financial institution financial insurance policies in several areas. It may be a great tool if they’ve sprawling European operations and wish monetary within the native forex.

In recent times, bike firm Harley Davidson and client big Colgate-Palmolive have resorted to the reverse Yankee route. Earlier this 12 months, Johnson & Johnson opted for this technique to lift €2.5 billion by tapping on decrease borrowing prices in Europe.

This type of bond issuance noticed a significant spike in 2019 when the European Central Financial institution’s stimulus push impacted bond yields in Europe. By Might, roughly €30 billion had been raised in EU bonds by U.S.-based firms, in keeping with Financial institution of America analysis. 

This bodes effectively for Europe as traders within the area might be uncovered to American firms with out endeavor the U.S. greenback debt’s danger, in accordance to funding agency T.Rowe Value. 

Coca-Cola raised €1 billion in Euro bonds earlier this 12 months, together with $3 billion in U.S. greenback bonds, which have been meant to finance a deal and assist offset the IRS case fees.   

The U.S. court docket judgment discovered that the Atlanta, Georgia-based had made “astronomical ranges” of income by working in low-tax international locations and holding that away from the eyes of U.S. authorities. That has resulted in a possible $16 billion legal responsibility as Coca-Cola has manufacturing areas worldwide and is sufficient to nullify a 12 months and a half’s income on the comfortable drinks big. 

Coca-Cola plans to attraction the court docket’s choice. 

Representatives on the firm didn’t instantly return Fortune’s request for remark.