Kraft moving ahead with financing

September 9, 2009

Why let a little rejection stand in your way? Kraft is proceeding with the financing it would need to buy Cadbury, even though the U.K. confectioner spurned the initial offer. It looks like it’s financing plans are  above what had been initially expected, which could mean slightly more new cash could  be added to a revised bid.

Credit Suisse had put the new debt at $6.667 billion. Bloomberg reports it looks more like $8 billion.

Kraft Foods Inc., the world’s second-largest foodmaker, is in talks to arrange about $8 billion of financing for its bid to buy candy maker Cadbury Plc, according to two people with knowledge of the matter.

Citigroup Inc. and Deutsche Bank AG are working on setting up debt financing to cover about half of the 9.77 billion-pound ($16 billion) offer to buy Cadbury, said the people, who declined to be identified because the talks aren’t public. The financing would consist of a bridge loan to be repaid with the proceeds of an investment-grade bond offering, one of the people said. Officials from the two banks declined to comment.

They could also be using the new debt to refinance some of Cadbury’s outstanding debt of $2.4 billion.

The key remains that the financing is based on an investment-grade rating. The added financing isn’t likely to pressure the company’s ratings enough to make a junk rating more likely.

Moody’s Investors Service warned Tuesday that it could downgrade Kraft’s ratings if the deal goes through, but most likely would limit it to a one notch drop.

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