Starbucks Corporation (NASDAQ:SBUX) is raising $500 million debt and Goldman Sachs Group Inc (NYSE:GS), JPMorgan & Chase Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS) are its partners in the offering. Fitch has commented on Starbucks’ senior unsecured notes offering, issuing an A rating on the debt. Among other things, Fitch bases it’s a rating on the notes on Starbucks’ disciplined financial management.
More growth in view
Fitch recalls Starbucks Corporation (NASDAQ:SBUX)’s solid growth trend in the recent years, saying that comps have been expanding at mid to high single-digit rate. The firm sees more comp growth for Starbucks going forward. The anticipated growth is expected to come from the company’s ongoing expansion through opening of new distribution points.
It also seems to Fitch that Starbucks is safe from surprise spike in the prices of key raw materials such as coffee because of its hedging strategy. The company has reportedly hedged a substantial portion of its anticipated 2016 coffee purchases at favorable prices. It is also negotiate hedging deals for 2017, which should allow the company to have a more predictable future.
Fitch predicts 7% spike in fiscal 2016 comps.
Fitch is impressed by Starbucks Corporation (NASDAQ:SBUX)’s financial practices whereby the company prioritizes reinvestment of excess cash. Additionally, the company also has a strong shareholder orientation, returning value to investors through consistent dividends and buybacks. Typically, Starbucks funds shares repurchases with cash generated organically.
Proceeds from the debt offering
Starbucks’ $500 million notes on offer will mature in 2021 and they attract a fixed interest rate of 2.100%. The company is hoping to use the proceeds from the notes offering to fund general corporate purposes such as acquisitions, business expansion, shares repurchases and dividend payments among others.
Starbucks Corporation (NASDAQ:SBUX) expects to close the notes offering on Feb. 4, 2016. The company had a debt of about $2.3 billion at the end of 2015.