Kraft in talks to raise $8 b for Cadbury bid

NEW YORK: Kraft Foods, the world���s second-largest foodmaker, is in talks to arrange about $8 billion of financing for its bid to buy candy maker Cadbury, according to two people with knowledge of the matter. Citigroup and Deutsche Bank are working on setting up debt financing to cover about half of the ��9.77 billion ($16 billion) offer to buy Cadbury, said the people, who declined to be identified because the talks aren���t public.

The financing would consist of a bridge loan to be repaid with the proceeds of an investment-grade bond offering, one of the people said. Officials from the two banks declined to comment.

Kraft may have to sweeten its offer to woo Cadbury after the confectioner rejected the initial bid as too low, said Brian Weddington, a senior analyst at Moody���s Investors Service. A higher bid may put pressure on its long-term credit rating of Baa2, two levels above junk.

Kraft has about $19 billion of bonds outstanding. ���Any follow-up offer by Kraft would likely involve a higher price,��� Weddington said in a statement. ���The increased leverage that would result under the proposed transaction would be considerable.���

Kraft is working with credit companies to maintain investment-grade ratings, chief executive officer Irene Rosenfeld said on a conference call. Kraft has about $1.25 billion of bonds maturing by August 2010, according to data compiled by Bloomberg.

���We do not expect that financing the proposed offer will be an issue,��� Lisa Gibbons, a Kraft spokeswoman, said in an e- mail. She declined to discuss specifics of the financing.

Moody���s Investors Service said that if it did lower Kraft���s Baa2 long-term credit rating, the downgrade would probably be by one level.