8-KFinancial Events

COCA COLA CO 8-K Report, Financial Obligation (Aug 19, 2011)

Filed August 19, 2011For Securities:KO

Summary

The Coca-Cola Company (KO) announced on August 19, 2011, the issuance of new senior notes as part of an ongoing debt exchange offer. Specifically, the company issued $651.8 million in 1.80% Senior Notes due 2016 and $323.0 million in 3.30% Senior Notes due 2021. These new notes were issued in exchange for outstanding debt from its subsidiary, Coca-Cola Refreshments USA, Inc. (CCR). This transaction is a follow-up to an earlier cash issuance of similar notes on August 10, 2011, and effectively reduces the principal amount of CCR's tendered debt by approximately $1 billion. From an investor's perspective, this filing highlights KO's proactive debt management strategy. By exchanging higher-principal debt from its subsidiary for its own senior notes, the company is consolidating its debt structure and potentially improving its overall leverage profile. The issuance of these notes at relatively low interest rates (1.80% and 3.30%) indicates favorable borrowing conditions for Coca-Cola at that time. Investors should note the unsecured and unsubordinated nature of these notes, which rank equally with other similar KO debt, and the company's commitment to registering these notes or offering registered exchange notes to qualified institutional buyers and non-U.S. persons, with penalties for non-compliance.

Key Highlights

  • 1Coca-Cola Co. issued $651.8 million in 1.80% Senior Notes due 2016 and $323.0 million in 3.30% Senior Notes due 2021 on August 19, 2011.
  • 2These new notes were issued in exchange for specified outstanding debt from its wholly-owned subsidiary, Coca-Cola Refreshments USA, Inc. (CCR).
  • 3The exchange offer resulted in a reduction of approximately $1 billion in the principal amount of CCR's tendered debt.
  • 4The 2016 and 2021 Notes are further issuances of existing series previously issued for cash on August 10, 2011.
  • 5The Notes are general unsecured and unsubordinated obligations of The Coca-Cola Company, ranking equally with other existing and future unsecured debt.
  • 6The company has entered into a Registration Rights Agreement, obligating it to use commercially reasonable efforts to register the Notes for resale or exchange them for registered notes.
  • 7Failure to meet registration obligations could result in additional interest payments to noteholders.

Frequently Asked Questions

The purpose of issuing these new senior notes was to facilitate an exchange offer for outstanding debt securities issued by its subsidiary, Coca-Cola Refreshments USA, Inc. (CCR). This exchange helps consolidate debt and reduce the overall principal amount of debt owed by the subsidiary.

This issuance represents a refinancing and exchange of debt. While it increases the principal amount of senior notes issued directly by The Coca-Cola Company, it reduces the debt obligations of its subsidiary, CCR, by approximately $1 billion. The new notes have relatively low interest rates, suggesting favorable terms for the company.

The 1.80% Senior Notes due 2016 mature on September 1, 2016. The 3.30% Senior Notes due 2021 mature on September 1, 2021. Interest on both series is paid semi-annually on March 1 and September 1, starting March 1, 2012.

As general unsecured and unsubordinated obligations, these notes rank equally with other similar debt of Coca-Cola. The primary risk highlighted is the company's obligation under the Registration Rights Agreement. If Coca-Cola fails to register the notes for resale or exchange them for registered notes, it may be required to make additional interest payments to the holders.