PepsiCo launches $2.75bn bond placement

PepsiCo launches $2.75bn bond placement

PepsiCo is taking advantage of low interest rates by selling US$2.75bn of debt in bond issues, as the soft drinks maker also seeks to return more cash to shareholders in 2012.

PepsiCo announced three bond issues in a stock filing yesterday (29 February). The bonds consist of $750m of senior notes due to 5 March 2015, $1.25bn of notes due on the same day of 2022 and another $750m of notes due in 2042. 

Due for repayment every six months starting 5 September, the notes will bear interest at 0.75%, 2.75% and 4% respectively. PepsiCo's CFO, Hugh Johnson, guided in the group's full-year results conference call last month that the firm plans to "term out debt" and "take advantage of a low interest rate environment".

He added: "This will increase our leverage, which we are comfortable with because we intend to limit both our number and size of tuck-in acquisitions and to do them only in emerging and developing markets." 

At the same time, PepsiCo is under pressure to increase returns to shareholders. Alongside a plan to cut 3% of its global workforce in order reinvest in core brands, particularly in North America soft drinks, PepsiCo has said that it will "step up" its share buyback programme to at least $3bn in 2012.

"Despite a year of earnings decline, we expect to return about $6.3bn to shareholders this year, up from $5.6bn in 2011," Johnston told analysts last month. The firm plans to raise its June 2012 dividend payment by 4% on the same payment of the previous year, to $2.15.