Coca-Cola is a behemoth in each proper. Which means huge earnings and monetary implications with a multi-billion-dollar price ticket.
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 Occasions 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 courtroom ruling.
Coca-Cola plans to situation two €500 million bonds and apply the proceeds to “potential funds” in its dispute with the Inner Income Service (IRS).
The corporate’s “reverse Yankee” transfer, whereby U.S.-based corporations increase cash in Euro or Sterling bond markets, has change into extra frequent amongst corporations on the lookout for debt financing avenues. It permits American corporations 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 want monetary within the native forex.
Lately, bike firm Harley Davidson and shopper large Colgate-Palmolive have resorted to the reverse Yankee route. Earlier this yr, Johnson & Johnson opted for this methodology to boost €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 corporations, based on Financial institution of America analysis.
This bodes nicely for Europe as buyers within the area may be uncovered to American corporations with out endeavor the U.S. greenback debt’s danger, based on funding agency T.Rowe Worth.
Coca-Cola raised €1 billion in Euro bonds earlier this yr, together with $3 billion in U.S. greenback bonds, which had been supposed to finance a deal and assist offset the IRS case prices.
The U.S. courtroom judgment discovered that the Atlanta, Georgia-based had made “astronomical ranges” of earnings by working in low-tax nations and conserving that away from the eyes of U.S. authorities. That has resulted in a possible $16 billion legal responsibility as Coca-Cola has manufacturing places worldwide and is sufficient to nullify a yr and a half’s earnings on the smooth drinks large.
Coca-Cola plans to enchantment the courtroom’s determination.
Representatives on the firm didn’t instantly return Fortune’s request for remark.
