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Coca-Cola is selling new debt securities worth one billion euros. The company wants to use these funds to pay off possible fees from a decades-long legal dispute with the US tax authorities, as a result of which the company could be in debt to the tune of 16 billion dollars.

The US soft drink manufacturer announced on Thursday that it plans to issue two bonds worth 500 million euros. The proceeds will be used in part “for any payments in connection with our ongoing tax dispute with the US tax authority IRS”.

The “reverse Yankee” issue – where US companies raise money on the euro bond market – came a day after the Financial Times revealed that Coca-Cola may have to pay $16 billion in back taxes for moving parts of its production to countries such as Ireland and Brazil. That’s enough to wipe out a year and a half of profits, and that figure is growing by more than a billion dollars a year.

The €1 billion that Coca-Cola will launch this month will be split equally between two senior unsecured bonds with maturities of 13 and 29 years. The amount will also be used to pay Coca-Cola’s final instalment on its purchase of Fairlife, a producer of ultra-filtered milk drinks, in 2025. The amount may also be used to repay other outstanding debt.

According to a ruling by a US tax court last week, the company hid “astronomical amounts” of profits in low-tax countries to protect them from US authorities.

With the planned issue, Coca-Cola becomes the latest US company to turn to European bond markets this year, as borrowing costs for euro-denominated debt are lower than for US dollar-denominated debt.

US companies such as Johnson & Johnson and Booking Holdings have raised a total of 30 billion euros in so-called reverse Yankee deals by May of this year, according to data from Bank of America.

Barclays, BNP Paribas and JPMorgan Chase are acting as bookrunners for the transaction, which will close on August 15.

The bond issue comes after Coca-Cola lost the latest in a four-year series of court rulings last week and is already required to pay $6 billion in cash to cover unpaid taxes and interest for 2007-2009.

The drinks company can reclaim the fine if it wins the appeal, which it plans to file later this year.

Coca-Cola and others are not the only ones at stake. The $16 billion could cover the IRS’s annual budget and will test the agency’s ability to pursue complicated cases – at a time when it has announced plans to crack down on corporate tax avoidance.

Neither the $6 billion fine nor the $10 billion the company will have to pay over the next 15 years are likely to have a negative impact on Coca-Cola’s earnings in the short term.

The payments do not have to be recorded on the income statement if the Atlanta-based company and its auditor, EY, agree that the chances of Coca-Cola winning the appeal are better than 50-50.