UPDATE 3-Kraft to sell at least $4 bln bonds Thurs-IFR

(Recasts, adds background, byline)

By Dena Aubin

NEW YORK, Feb 3 (BestGrowthStock) – Kraft Foods (KFT.N: ) is planning
to sell a minimum of $4 billion in bonds in four parts on
Thursday to help finance its $18.7 billion acquisition of
British chocolatier Cadbury, IFR said on Wednesday.

The sale is expected to include 3.25-year, 6-year and
10-year notes and 30-year bonds, each a minimum of $1 billion
in size, a banker close to the deal said.

Depending on the price, “I would anticipate pretty decent
demand,” said Richard Lee, head of fixed-income at
broker-dealer Wall Street Access in New York.

The tone in the corporate bond market has been a little
stronger since Tuesday, “with a little more confidence in the
market…on a combination of things,” said Lee.

Expected yields on the offering are about 150 basis points
over Treasuries on the 3.25-year notes and about 187.5 basis
points over Treasuries on the six- and 10-year notes, according
to IFR, a Thomson Reuters service. The 30-year bonds are
expected to yield about 15 basis points more than the 10-year

BNP Paribas, Citigroup, Deutsche Bank, HSBC and RBS are
joint lead managers on the sale.

Kraft won control of Cadbury on Tuesday as holders of
almost 72 percent of Cadbury’s stock accepted the takeover that
will create the world’s biggest confectioner. Kraft needed just
50 percent plus one share to acquire Cadbury. For details click
on [ID:nLDE6111CO].

Kraft has commitments for a 7.1 billion pound ($11.3
billion) bridge loan to temporarily finance the Cadbury
acquisition. Commitments for the bridge loan are expected to be
reduced by the amount raised in this week’s bond sale, Moody’s
Investors Service said in a statement on Wednesday.

Moody’s rates Kraft’s new senior unsecured bond issue Baa2,
its second-lowest investment grade. The issue is expected to be
rated BBB-minus by Standard & Poor’s, its lowest investment

S&P on Tuesday downgraded Kraft by two notches, saying the
debt being taken on to purchase Cadbury will weaken Kraft’s
credit quality. However, S&P assigned a positive outlook,
saying it could upgrade Kraft if it successfully integrates
Cadbury and improves credit measures.

Moody’s on Tuesday confirmed Kraft’s rating, saying it
expects the company to generate sufficient cash flow to restore
its credit quality in less than two years. However, Moody’s
assigned a negative outlook to the rating, citing a risk that
Kraft will not quickly reduce leverage “given its history of
unfavorable shifts in financial policy.”

To keep its rating, Kraft will need to have a disciplined
and far more conservative financial policy over the next 18 to
24 months, Moody’s senior analyst Brian Weddington said in a

“This would include devoting the vast majority of its
discretionary cash flow to debt reduction,” he said.

Kraft will likely be downgraded if it resumes share
repurchases or leveraged acquisitions before it restores its
credit quality, he said.

Stock Market Money

(Additional reporting by Caryn Trokie and John Parry in New
York and Alex Chambers in London; Editing by Kenneth Barry)

UPDATE 3-Kraft to sell at least $4 bln bonds Thurs-IFR