The dairy company's treasurer Stephan Deschamps said in Dunedin this week that it would be used for normal business purposes, including retiring short-term debt, a prudent move given the current business environment.
Investors flocked to the bond offering, which sought $300 million but realised $800 million, demand that Mr Deschamps said showed respect for Fonterra's business strength and profile.
It also showed that investors were looking beyond the current downturn in dairy prices, media coverage about problems with Sanlu and a falling milk payout, and saw strength in the sector's longer-term fortunes.
"We never expected such a response."
The 7.75% minimum interest rate was attractive given low bank interest rates, but investors also sought a safe haven given the recent collapse of several finance companies, he said.
The six-year life of the bonds was a conscious effort to extend the term profile of bond issues to give the company more scope and room to move.
Mr Deschamps said the long-term outlook for dairy remained strong given population growth in Asia, the increased wealth of many Chinese, the move to a western diet and the health benefits of milk.
Short-term issues were caused by an oversupply of milk and international pressure on prices.
Traditionally, Fonterra had looked overseas for its bond issues, but last year there were clear signs that overseas investors were focusing on domestic companies, Mr Deschamps said.
"It was a trend we could not ignore, so we looked to New Zealand."
Given the success of the issue, Fonterra would consider the local market again, Mr Deschamps said.
