Guinness-owner Diageo sells €1.9 billion in euro bonds

Diageo has sold a new long-term euro debt equivalent to €1.9bn, the proceeds of which will be used for “general corporate purposes”, the drinks multinational has said.

The British company, which owns more than 200 brands sold in nearly 180 countries, priced in aggregate €1,9bn of fixed rate euro-denominated bonds on Tuesday (27 August) under its European Debt Issuance Programme.

A corporate bond offering is a debt security that a company issues to raise capital. When an investor buys a corporate bond, they are essentially lending money to the company in exchange for interest payments over a set period of time. At the end of the bond’s maturity date, the company pays back the investor the initial loan amount.

The bumper corporate bond offering consists of three series of bonds: (i) €700m bonds due 28 February 2031 with a coupon of 3.125% per annum; (ii) €700m bonds due 30 August 2035 with a coupon of 3.375% per annum; and (iii) €500m bonds due 30 August 2044 with a coupon of 3.750% per annum.

Proceeds from each issuance will be used for general corporate purposes, the company said in a press release.

Banco Santander, S.A., Citigroup Global Markets Limited, Morgan Stanley & Co. International Plc and NatWest Markets Plc have been appointed as active joint lead managers, and HSBC Continental Europe and UBS AG London Branch have been appointed as passive joint lead managers.

Diageo’s London stocks are seen as their cheapest since 2018 in July. From a heady high of just over £40 each in spring 2022 when the post-Covid recovery boom was in full flood, they have lost more than a third of their value to stand at just under £26 each.

Chief executive Debra Crew tried to reassure investors saying: “We have set out a clear action plan to address recent performance challenges in our [Latin America and the Caribbean] region and we remain confident in the long term.”

That suggested that the group would soon be back on the growth path and that the financial damage might be limited to the trading year which ran until the end of June.

The owner of the Smirnoff vodka, Johnnie Walker whiskey and Guinness brands released its results for the year to 30 June 2024 last month. The results were not what chief executive Debra Crew would have wanted to mark her first full year in charge.

profits fell by 4.8% but operating profit rose by 8% to $6 billion thanks largely to cost savings. Reported net sales of US$20.3 billion fell by 1.4%, while the group’s organic net sales were US$129 million or 0.6% lower than in 2023. The 2.9-point price/mix gain was more than offset by volumes 3.5% lower.

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