Banks Financing Kraft Bid For Cadbury May Grow To 18 - Source
November 06 2009 - 12:31PM
Dow Jones News
The number of banks involved in the financing for Kraft Foods
Inc.'s (KFT) bid for Cadbury PLC (CBY) could expand to 18, a person
familiar with the matter said Friday.
The bridge loan is estimated to be GBP5 billion to GBP5.5billion
(about $9 billion), and is arranged by Citigroup, Deutsche Bank and
HSBC. A further six banks will join the leading trio, including BNP
Paribas, Barclays Capital, Royal Bank Of Scotland and Credit
Suisse, according to several people familiar with the matter. The
leads are expected to cast the net even further, one of them said,
with Mizuho and Calyon also likely to be among the banks playing a
role.
Corporate bonds would replace the bridge loan, with the banks
likely to sell the bonds in several different currencies, tapping
the dollar, euro and sterling markets. This would match any new
debt with the revenue bases of the merged entity, as well as with
the existing currency mix of both Cadbury and Kraft's capital
structures.
Under U.K. law, Kraft, of Northfield, Ill., must make a formal
offer for Cadbury by Monday or walk away for six months. In
September, Cadbury immediately rejected Kraft's cash and stock bid,
then valued at $16.7 billion (GBP10.2 billion).
While Kraft's decision to pursue Cadbury was met by stockholders
without enthusiasm, judging by Kraft's falling shares, banks have
been eager to extend funds. The relationship would lead to
lucrative business with the merged company, such as future loan
facilities, share sales, mergers and acquisitions and refinancing
mandates further down the line.
Kraft shares are recently trading at $26.70, about a 5% drop
from before the bid was announced.
Kraft couldn't immediately be reached for comment. The banks
couldn't be immediately reached for comment.
-By Kate Haywood, Dow Jones Newswires; 212-416-2218;
kate.haywood@dowjones.com
-By Romy Varghese, Dow Jones Newswires; 215-656-8263;
romy.varghese@dowjones.com
(Carol Dean in London and Anjali Cordeiro in New York also
contributed to this article.)
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