Fonterra chief financial officer Lukas Paravicini says a new $300 million funding facility with the Bank of China will give the co-operative greater flexibility.
Fonterra chief financial officer Lukas Paravicini says a new $300 million funding facility with the Bank of China will give the co-operative greater flexibility.
Fonterra said it had established a 1.5 billion renminbi ($300 million) multi-currency bank facility with the Bank of China, which it said it would allow greater flexibility in how it funds its Chinese operations.
The co-operative said the move, which it believed was a first for New Zealand company, wasa landmark agreement consistent with both organisations' commitment to building New Zealand business interests in China.
Fonterra said it provided Fonterra with greater flexibility in how it funds its Chinese operations.
The bank's New Zealand chief executive, David Lei Wang, said annual trade between New Zealand and China had almost tripled to $23 billion since the Free Trade Agreement was signed in 2008, and Chinese banking services played an important role in fostering cross-border transactions and investment.
"We see great opportunities in developing more renminbi products and tapping into China's debt capital markets on behalf of New Zealand financial institutions and government agencies," Wang said in a statement.
Fonterra's chief financial officer, Lukas Paravicini, said the new debt facility underlined the Co-operative's continued focus on building an integrated business in China.
"Bank of China has strong liquidity in renminbi and its local presence and knowledge offer us additional benefits in the rapidly developing Chinese financial markets," Paravicini said.
"Having local funding arrangements is a natural extension of our activities in China," he said.
China is by far Fonterra's biggest customer and the co-op has substantial interests there, including am 18 per cent stake in infant formula company Beingmate.
The co-op aims to produce one billion litres every year in China by 2018 and with two farms milking in the Hebei Province and another three under development.
Paravicini said the accord complemented the serviced we receive from our broad range of banks internationally. The Bank of China facility did not mean Fonterra was taking on more debt, he said.
"There is no change to our existing strategy of growing our business in China," he said. "This is simply a better way to organise the funding of that strategy."
"It's important for our business and our operation, especially also as it aligns our funding with our market," Paravicini told the Herald.
"It also shows that we are relevant for China banks and the Bank of China," he said. Bank of China is one of the top four banks in China and the top five banks globally.
