In a strategic financial maneuver, Coca-Cola has undertaken two major debt offerings to address a substantial tax claim from the Internal Revenue Service (IRS).
The company aims to raise a total of €1 billion through this offering
According to El Economista the IRS has demanded $6 billion from the beverage giant, citing unpaid taxes and accrued interest. To manage this significant liability, Coca-Cola has issued long-term debt, including a novel move into the euro bond market, known as a reverse Yankee bond issuance.
The company has structured this debt with maturities ranging from 2037 to 2053. BNP Paribas coordinated the euro bond offering, with Barclays Bank and JPMorgan Securities serving as underwriters.
According to the Securities and Exchange Commission (SEC) filings, Coca-Cola plans to use the net proceeds from this issuance for general corporate purposes, which includes potential payments related to its ongoing tax litigation with the IRS.
The company aims to raise a total of €1 billion through this offering, with €500 million in each tranche.
The company owed $2.7 billion in taxes, in addition to $3.3 billion
Additionally, Coca-Cola recently announced another bond issuance totaling $3 billion, with maturities between 2034 and 2064.
This operation saw involvement from Santander US Capital Markets, Wells Fargo Securities, Barclays Capital, BofA Securities, Citigroup Global Markets, Deutsche Bank Securities, Goldman Sachs, Morgan Stanley, and JPMorgan Securities.
Similar to the euro bond issuance, the company intends to use part of these funds to address its tax dispute with the IRS.
Last week, Coca-Cola reported that the U.S. Tax Court determined the company owed $2.7 billion in taxes, in addition to $3.3 billion in interest, following a dispute with the IRS.
This claim dates back to a 2015 notification, which sought approximately $3.3 billion in additional federal taxes for 2007-2009 and aimed to retroactively reassign over $9 billion in income.
Coca-Cola maintains that the IRS and the Tax Court misinterpreted and incorrectly applied the relevant tax rules. The company is preparing to appeal the ruling but will proceed with paying the agreed debt and interest to the IRS.
