Coca-Cola is a giant in every way. That means big profits and financial impact in the billions of dollars.
The company, which sells its namesake drink almost everywhere in the world, has been in a long-running dispute with US tax authorities over a potential $16 billion tax bill.
Although the full amount is not yet due, Coca-Cola is preparing for the potential cost by selling €1 billion in new debt, Financial Times reported on Thursday.
Last week, the beverage company said it was preparing to pay $6 billion in unpaid taxes and interest dating back about 15 years after a US Tax Court Ruling.
Coca-Cola plans to issue two bonds worth €500 million and use the proceeds for “potential settlements” in its dispute with the Internal Revenue Service (IRS).
Company “Yankee” The move, in which US-based companies raise money in the Euro or Sterling bond markets, has become more common for companies looking to debt financing way. It allows US companies to take advantage of the monetary policies of central banks in different regions. It can also be a useful tool if they have extensive business operations in Europe and need financing in local currencies.
In recent years, motorcycle company Harley Davidson and consumer goods giant Colgate-Palmolive have used Yankee route. Earlier this year, Johnson & Johnson chose this method to raise €2.5 billion by tapping lower borrowing costs in Europe.
This form of bond issuance has seen a surge in in 2019 as the European Central Bank’s stimulus moves weigh on European bond yields. U.S.-based companies raised about €30 billion in EU bonds through May, according to research from Bank of America.
This bodes well for Europe, he said, as investors in the region can gain exposure to US companies without the risk of US dollar debt. to investment company T. Rowe Price.
Earlier this year, Coca-Cola raised €1 billion in euro bonds, along with $3 billion in US dollar bonds, to help finance a deal and help offset IRS charges.
The US court ruling found that the Atlanta, Georgia-based company had made “huge profits” by operating in low-tax countries and avoiding US regulatory scrutiny. That led to potential liabilities of up to $16 billion because Coca-Cola had manufacturing sites around the world, enough to wipe out a year and a half of the beverage giant’s profits.
Coca-Cola plans to appeal the court’s decision.
The company representative did not return immediately. Luckrequest for comment.
