Kraft to Pay Above Average Interest Rates to Get Control of Cadbury
Still determined to take over British chocolate maker Cadbury, Kraft Foods has offering a premium to lenders for financing the deal. Kraft is offering lenders 2-3 percentage points more than the benchmark rates on a loan of $9.2 billion to complete the purchase. Bankers leaked the information to Bloomberg.
On Nov. 9 the maker of Oreos and Ritz crackers bid 300 pence in cash and 0.2589 of new Kraft shares for each share of Cadbury. The interest on the loan being provided by nine lenders will be pegged to the London interbank offered rate, said the bankers, who declined to be identified because the negotiations are private.
Richard Jacques, a London-based external spokesman for Northfield, Illinois-based Kraft declined to comment.
The range of potential interest margins includes possible increases should the borrower be downgraded, the bankers said. Kraft is rated A- by Standard & Poor's, the fourth-lowest investment grade, while Moody's Investors Service ranks it two levels lower at Baa2.
Kraft's bid for Cadbury is considered hostile and the Cadbury board of directors has asked its shareholders to reject the bid.
