The Great Debate UK
Sometimes the wait can be worth it. Kraft’s sweetened offer for Cadbury followed four months of drooling over the British chocolatier that must have seemed like four years for Irene Rosenfeld, Kraft’s chief executive. But the delay had its benefits. Though the cheese and crackers conglomerate will have to raise more money to fund the final deal, that's become easier and cheaper since Kraft launched its bid.
Kraft’s offer, now agreed by Cadbury’s board, promises a cash component of 500 pence per Cadbury share. That’s a 66 percent increase over the cash part of the lower and more stock-heavy proposal in September. Kraft’s sale of its pizza business to Nestle earlier this month will fund roughly 60 pence of that. Given Kraft’s modest cash holdings, the rest will have to be funded largely with debt -- potentially some $10 billion of it.
In November, Kraft received commitments for 5.5 billion pounds ($9 billion) of funding from a cluster of banks including Citigroup, Deutsche Bank and HSBC. That’s still available and along with a separate revolving facility gives Kraft the borrowing capacity it needs. The downside is that the banks are only offering bridge financing that has to be replaced within a year.
Happily for Ms. Rosenfeld, the delay in snagging Cadbury has allowed conditions in the investment-grade corporate bond market to improve. Now, Kraft should have little trouble refinancing these bridge loans in the United States or Europe -- and more cheaply than it could have hoped back in September. The average risk premium on better-rated corporate debt has dropped to 1.65 percentage points over Treasury yields, from 2.32 percentage points in early September, according to Barclays Capital.
from The Great Debate:
It looks bad for the dollar, but looks can be deceiving.
Its sharp decline in the last week has pushed the euro to its highest level in a year and reignited fears that there's only one place for the dollar to go, and that's down.
Rhetoric from influential investors like Warren Buffett as well as big foreign buyers of U.S. debt like China and Russia has fed that sense of doom.