McDonald’s Corp. is getting a $3 billion loan that it will use to repatriate foreign profit back to the U.S. to benefit from a tax break, bankers involved in the deal said Tuesday.
Barclays PLC and Societe Generale SA are arranging the three-year credit for the Oak Brook-based burger giant, said the bankers, who declined to be identified.
McDonald’s posted a 10 percent drop in second-quarter profit, citing costs to repatriate about $3.2 billion in foreign earnings and the smallest sales gain in more than two years. Sales rose 7.8 percent, to $5.1 billion.
McDonald’s, which in July announced plans for bringing back foreign profit, will spend the cash in the U.S. on capital improvements, including new restaurants and remodelings, and salaries, said spokeswoman Anna Rozenich, who declined to confirm or deny the loan.
The company is rated A2 by Moody’s Investors Service, the sixth highest of 10 investment-grade ratings. Standard & Poor’s rates it an equivalent A.
The loan’s interest margin is 0.145 percentage point over interbank lending rates, the bankers said. The three-month dollar London interbank lending rate, an average used as a borrowing benchmark, is 3.87 percent.
The American Jobs Creation Act lets U.S. companies deduct 85 percent of the profit they return to the country from overseas operations. This means the rate they’ll pay will drop to about 5.25 percent instead of 35 percent if the funds are reinvested in the U.S. to create jobs.
