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Author: trptrade Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35272  
Subject: Re: Coca Cola’s Bonds Date: 11/30/2009 6:05 PM
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"The rate of increase gradually decreases"

Logarithm or an nth root (polynomial of order 0<x<1), depending on the actual shape.

I think if this can be bought at an attractive price, it's a reasonable bond, but a few comments:

I would only cautiously consider Coca-Cola Enterprises (CCE) a global enterprise. While Coca-Cola (KO) has only 25% of Revenue in North America, CCE has 75% in North America. Most of the non-US bottling is KOF and CCH.

This cuts two ways. CCE has spent many years consolidating Coca-Cola bottling companies in North America (to the point where it is 75% of Coca-Cola Inc's bottling capacity in the US), so it can't grow much more in the US. This does mean CCE has the ability to grow outside the US to pick up that global presence that KO has, which gives it more levers to pull for growth than KO (assuming it wants to purchase or can avoid KOF and CCH)

CCE is stable (very stable cash flow, if not growing well), it is 35% owned by KO and has exclusive distribution agreements for KO products in many regions. All pluses. IMHO, CCE debt - if purchasable at an attractive price - would be much more attractive than its common. Unfortunately, CCE has a reasonable history of destroying enterprise value (specifically having to write down acquired assets), which has left the common trading sideways for more than a decade, with an mediocre dividend (currently 1.6%).

KO debt and common could both be attractive at the right price.

I'd note, CCE cash flow can be calculated to show - barring a major blowup - it is capable of sustaining the current debt level and cover the 0's of 20, which is part of the reason it's A3/A, but it doesn't hurt to check for oneself.

Tom
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