Bloomberg News

Kraft Sells $800 Million of Bonds for Refinancing Before Spinoff

January 06, 2012

Jan. 5 (Bloomberg) -- Kraft Foods Inc. sold $800 million of floating-rate notes that must be redeemed before the world’s second-biggest food company spins off its North American grocery business.

The 18-month notes pay 87.5 basis points, or 0.875 percentage point more than the three-month London interbank offered rate, according to data compiled by Bloomberg. The Northfield, Illinois-based company must redeem the notes at par five days before the date the spinoff becomes effective, it said today in a filing with the Securities and Exchange Commission.

Kraft, which has about $3.56 billion of bonds coming due this year, needs to cut debt to achieve its goal of maintaining investment-grade ratings as it separates units focused on U.S. consumers from businesses selling to the rest of the world. Refinancing the maturities will help “get debt on the right side,” Chief Financial Officer David Brearton said in a Nov. 2 conference call with analysts.

“We’re preparing for the spinoff and getting both companies in a position to be investment-grade going forward,” Michael Mitchell, a Kraft spokesman, said in a telephone interview.

Proceeds from the transaction may be used to repay debt and for general corporate purposes, according to the SEC filing. The company said it plans to complete the spinoff before the end of this year. Citigroup Inc. and Royal Bank of Scotland Group Plc are managing the transaction.

Kraft has 2 billion euros ($2.56 billion) of 5.75 percent notes coming due on March 20 and $900 million of 6.25 percent bonds maturing on June 1, Bloomberg data show.

Moody’s Investors Service ranks Kraft Baa2, two steps above junk, with a “developing” outlook. Standard & Poor’s rates the company an equivalent BBB.

--Editors: Mitchell A. Martin, Faris Khan

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus