The skittish debt markets may take some of the fizz out of Cadbury Schweppes Plc’s auction of its North American beverage unit, according to sources familiar with the situation.

Cadbury remains in active talks with two groups of private equity firms, but final bids may fall short of recently tempered expectations. Bids, which are due later this week, may hover around 7 billion pounds, sources said.

Reuters reported earlier this month that price tag had softened to around 7.5 billion pounds, down from 8.0 billion, as tighter credit conditions made it more costly for private equity firms to borrow money. Now, the price could fall even lower as the debt market continues to swoon. 

Bankers on Wednesday postponed a $12 billion syndicated loan to finance the sale of Chrysler Group, while Alliance Boots delayed syndication of $10.4 billion in debt backing its buyout.  

Despite the credit crunch, Cadbury’s North American beverage business, which includes Dr Pepper, 7UP, Snapple and Canada Dry ginger ale, is “still a coveted business and hard to duplicate,” said one source.

A team including Blackstone Group, Kohlberg Kravis Roberts & Co. and Lion Capital remains viewed as the front-runner with the most interest and financing in place, sources said. The Blackstone group bought Cadbury’s European beverage unit last year.

The second bidding group includes Bain Capital Partners, Thomas H. Lee Partners and TPG, sources said. Blackstone, Cadbury, KKR, Thomas H. Lee and TPG declined to comment. Bain, Lion Capital, could not be immediately reached for comment. 

So, the auction isn’t drying up. It just might have less fizz.