McDonald’s Corporation (MCD) recently announced that it has raised $29.5 million through the sale of 200 million of Yuan-denominated bonds in a private placement to institutional and professional investors in Hong Kong. The bonds will bear a coupon rate of 3.00% per annum and mature in three
years.
The announcement makes McDonald’s the first foreign corporate to raise such debt after China moderated some rules regarding Yuan to internationalize its currency.
The proceeds from the sale of the bonds will fund the expansion plan of McDonald’s outlet in China, including the opening of new restaurants.
According to McDonald’s APMEA (Asia/Pacific, Middle East and Africa) management, this announcement is reflective of the company’s growing confidence on its long-term growth opportunities in China.
McDonald’s continues tapping the Chinese market by opening new restaurants, reimaging existing restaurants and maximizing value service initiatives. McDonald’s has already opened 48 restaurants in China in the second half of 2010 and remains on track to open a total of 150-175 restaurants by year end.
McDonald’s has opened more than 1,100 stores in Mainland China since it opened its first restaurant on October 8, 1990, in Shenzhen and employed more than 60,000 employees in the country. Although China exhibited a slow growth in the first half of 2010, hurt by a slowdown in the areas outside the
major cities, McDonald’s remains optimistic on accelerating growth in the country, following a pick up in economy. The company targets to double its China network to more than 2,000 outlets by 2013.
With moderate growth prospects and an exposure to faster-growing international markets, we think McDonald’s is a relatively safe investment. McDonald’s currently retains a Zacks #3 Rank, which translates into short-term Hold rating.
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