3 November, 2009
UPDATE 1-Kraft obtains $9 bln loan for Cadbury bid -- RLPC
* Nine banks involved
* Lead underwriters include Citi, Deutsche, HSBC
By Smita Madhur and Faris Khan
NEW YORK, Nov 3 (Reuters) - Kraft Foods Inc (KFT.N) has obtained a $9 billion in bridge financing from a group of nine banks to back its 10.2 billion pound ($16.7 billion) bid for Britain's Cadbury Plc (CBRY.L), bankers told Thomson Reuters LPC.
The nine banks include lead underwriters Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), HSBC Holding Plc (HSBA.L) and Barclays Plc (BARC.L).
Citi declined to comment on the financing. Kraft was not immediately available to comment.
Kraft needs to show Britain's Takeover Panel that it has committed financing in place before Nov. 9, when it has to bid for a second time or walk away for six months, after Cadbury rejected its initial cash and share bid in September.
Analysts have said they expect Kraft to sweeten the terms of its bid, which is currently split between a 60 percent equity component and a 40 percent cash component.
But Kraft is likely to stick to its initial cash and stock proposal to Cadbury shareholders that was disclosed on Sept. 7, sources familiar with the situation told Reuters this week.
Kraft launched its bid on Sept. 7 at 300 pence cash and 0.2589 new Kraft shares per Cadbury share, valuing the British group at 745 pence as of Kraft's Sept. 4 closing share price.
One source who is not involved in the deal said that, in addition to the $9 billion acquisition financing, Kraft is likely to raise an incremental revolver to refinance its $4.5 billion revolver that is coming due in April 2010.
STRONG RELATIONSHIPS
In early October, some market sources raised concerns over Kraft's ability to simultaneously raise acquisition financing and tackle the upcoming maturity on the $4.5 billion.
But other sources had pointed out that Kraft would not have much difficulty raising bridge financing or rolling over into a new facility since it enjoys strong relationships with several banks owing to its global ancillary businesses.
In an SEC filing on Nov. 3, Kraft said it must maintain a net worth of $20 billion as per the agreement on its $4.5 billion revolver. As of Dec. 31, 2008, Kraft's net worth was $22.3 billion.
In November 2009, Kraft has $750 million of long-term debt maturing, which it expects to fund through commercial paper issuance or long-term debt.
In September, when Kraft announced its bid for Cadbury, Kraft also said it was looking to maintain its investment grade rating in spite of the acquisition financing.
Kraft's senior unsecured rating is Baa2/BBB+, while its long-term issuer rating is Baa2/A-.
In September, some sources noted that raising a $7 billion to $8 billion loan could increase leverage and erode the company's investment grade ratings.
But other sources contended that any increase in leverage could easily be offset by the EBITDA coming into the deal. Kraft's debt-to-capitalization ratio at Dec. 31, 2008, was 0.48, according to the SEC filing.
The combined company is expected to have annual global revenues of $50 billion, according to projections from Kraft.
In December 2007, Kraft raised a 3.8 billion euro (roughly $5.5 billion) 364-day bridge loan to back its acquisition of LU Biscuit. (Reporting by Smita Madhur +1-646-223-6833 and Faris Khan +1-646-223-6835)
Source: http://www.reuters.com
UPDATE 1-Kraft obtains $9 bln loan for Cadbury bid -- RLPC Added: (03.11.2009)
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