By Tim Catts Feb. 4 (Bloomberg) — Kraft Foods Inc. , the world’s second- largest food company, plans to issue debt to pay for its takeover of Cadbury Plc as borrowing costs for companies rise. Kraft may sell at least $4 billion of notes due in 3.25, 6, 10 and 30 years, said a person familiar with the offering who declined to be identified because terms aren’t set. The Northfield, Illinois-based company won the approval of Cadbury’s shareholders for the 11.7 billion pound ($18.6 billion) acquisition on Feb. 2. Kraft is marketing its debt as yields on investment-grade corporate bonds rose to 4.623 percent on average yesterday, the highest level since Jan. 13. Investors concerned about the strength of the U.S. economy may favor the foodmaker’s debt because its businesses aren’t highly susceptible to recession, said William Larkin , who helps manage $500 million at Cabot Money Management in Salem, Massachusetts. “The food business is less economically sensitive, so it’s the perfect play in this kind of marketplace,” Larkin said. “Could banks have another leg down? It’s possible, if unlikely. Will Kraft be around in 10 years? It’s very likely.” The premium investors demand to own investment-grade corporate bonds instead of Treasuries was unchanged yesterday at 182 basis points, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Treasuries fell on speculation that nonfarm payrolls may increase, pushing corporate borrowing costs higher. A basis point is 0.01 percentage point. PNC Sells $2 Billion PNC Funding Corp., a unit of Pittsburgh, Pennsylvania-based PNC Financial Services Group Inc., sold $2 billion of five- and 10-year notes yesterday, leading $4.28 billion of high-grade corporate debts sales, according to data compiled by Bloomberg. PNC had earlier planned to sell $1.5 billion of notes, according to a person with knowledge of the offering who declined to be identified. Denbury Resources Inc. sold $1 billion of notes due in 2020 and Crosstex Energy Inc. issued $725 million of eight-year debt as high-yield, high-risk companies placed $2.43 billion of bonds. Junk-bond yields relative to Treasuries fell 8 basis points to 646 basis points, the most since Jan. 7, according to data compiled by Bloomberg. The average yield fell to 9.02 percent from 9.048 percent. High-yield debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s and Fitch Ratings. The energy companies benefited from speculation that petroleum prices will rise, said Ken Duffel , an analyst at KDP Investment Advisors in Montpelier, Vermont. “If you believe oil and gas prices are stable now and could improve, you see less likelihood of default and therefore less risk,” he said, ”and the cost of that risk becomes less.” This year’s corporate debt sales total about $129 billion, compared with $153.4 billion in the similar period last year, Bloomberg data show. Following is a description of at least $6.7 billion of pending sales of dollar-denominated bonds in the U.S. Investment Grade NOBLE GROUP LTD. plans to sell $400 million of notes in a reopening of an October debt sale, the company said in a statement to the Singapore stock exchange. The Hong Kong-based commodity supplier backed by China’s sovereign wealth fund issued $850 million of 6.75 percent debt on Oct. 22 that yielded 344.5 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. BANK OF INDIA plans to sell bonds denominated in U.S. dollars, a person familiar with the deal said. Bank of India hired Barclays Capital, Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc and Royal Bank of Scotland Plc to arrange investor meetings in Singapore Feb. 4, Hong Kong Feb. 5 and London Feb. 8, the person said, declining to be identified before a public announcement. KOREA HYDRO & NUCLEAR POWER CO., a unit of state-run Korea Electric Power Corp., hired five banks to help it sell dollar- denominated notes, according to two people with direct knowledge of the matter. The sale will be managed by Bank of America Merrill Lynch, Citigroup Inc ., Deutsche Bank AG, HSBC Holdings Plc and UBS AG, said the people, who declined to be identified before a public announcement. Korea Hydro may sell $500 million in five-year bonds, according to one of the people. Not Rated SENSIENT TECHNOLOGIES CORP. said it entered into an agreement with a group of financial institutions for the issuance of $110 million in fixed-rate, senior notes, according to a Nov. 19 statement distributed by Business Wire. PT BAKRIE & BROTHERS appointed Credit Suisse Group AG and Nomura Holdings Inc. to arrange the sale of equity-linked notes of $150 million to $200 million, Bisnis Indonesia said, citing Finance Director Eddy Soeparno. The notes may be sold by the end of March to help pay debt and fund investment, the report said. High Yield KEMET CORP. plans to sell $275 million of senior notes due in 2018, the company said in a statement distributed by PR Newswire. Proceeds from the sale of notes will be used to repay substantially all the capacitor maker’s debt under existing credit facilities and to fund a tender offer for a portion of its 2.25 percent convertible senior notes due 2026, according to the statement. STALLION OILFIELD HOLDINGS INC. plans to sell $225 million of senior secured notes due 2015, according to Moody’s Investors Service. Proceeds of the new issue will be used to repay outstanding debt under Stallion’s existing credit facility and to add cash on hand, Moody’s said in a rating report. Moody’s rated the debt B3. The Houston-based oilfield drilling and supply provider emerged from bankruptcy yesterday. ITC^DELTACOM INC. plans to sell $325 million of senior secured notes due 2016 in a private offering, the company said Feb. 1. Proceeds will be used to pay down the Huntsville, Alabama-based company’s existing senior secured credit facilities, according to the statement. The offering is expected to be completed this week, subject to market conditions. SABLE INTERNATIONAL FINANCE LTD. , a unit of South Africa’s Sable Holdings Ltd., plans to issue $500 million of senior secured notes due 2017, according to a person familiar with the transaction. The notes, which will be non-callable for four years, may be rated Ba2 by Moody’s Investors Service and BB by Standard & Poor’s, said the person, who declined to be identified because terms aren’t set. Proceeds from the sale will be used to refinance existing debt and provide liquidity, the person said. NFR ENERGY LLC and NFR Energy Finance Corp. plan to sell $250 million of seven-year senior unsecured debt, according to a person familiar with the transaction. The notes are expected to price on Feb. 9, said the person, who declined to be identified because terms aren’t set. NFR Energy, an oil and gas investment firm created as a joint venture between Nabors Industries Ltd . and First Reserve Corp., is selling bonds for the first time, according to data compiled by Bloomberg. Proceeds from the sale will be used to repay an outstanding senior secured revolving credit facility and a second-lien term loan, the person said. Nabors is the world’s largest onshore oil and natural-gas driller, and First Reserve Corp. is a private-equity firm specializing in the energy industry. SEVERSTAL COLUMBUS , a U.S. unit of Russia’s largest steelmaker, seeks to sell $525 million of eight-year bonds, two bankers familiar with the offering said. Citigroup Inc. and Credit Suisse Group AG are managing the sale, according to the bankers, who declined to be identified because the deal is private. COMMUNITY EDUCATION CENTERS INC. plans to sell $210 million of six-year notes, according to a person familiar with the offering. Proceeds from the sale may be used to repay debt, said the person, who declined to be identified because terms aren’t set. IMS HEALTH INC. plans to issue $1 billion of senior secured notes due 2018, according to Moody’s Investors Service and Standard & Poor’s. Proceeds from the sale of senior notes will partially fund a leveraged buyout agreed to in November, the ratings companies said in separate reports. IMS agreed to be acquired by funds managed by TPG and the Canada Pension Plan Investment Board for about $5.2 billion. Moody’s rated the eight-year notes B3, and S&P assigned a B rating. HUDSON PRODUCTS HOLDINGS INC. plans to sell $250 million of six-year senior secured second-lien notes, according to a person with knowledge of the transaction. The bonds are callable after three years. The company hired UBS AG and BNP Paribas SA to manage the sale of high-yield notes. Standard & Poor’s gave the notes a B- rating. MCCLATCHY CO. , the publisher of the Miami Herald, plans to sell $875 million of senior secured first-lien notes due in 2017 next week, the company said in a statement distributed by PR Newswire. The notes may yield 11.75 percent and may be sold as soon as today, said a person familiar with the offering who declined to be identified because terms aren’t set. The Sacramento, California-based company will use proceeds to refinance $190 million in bonds due in 2011 and 2014 and $614 million in bank debt, it said in the statement. Moody’s ranked the new notes B1. MEDIA GENERAL INC. plans to sell $350 million of senior secured notes due in 2017, the Richmond, Virginia-based company said in a statement distributed by PR Newswire. Proceeds will be used to refinance debt from a revolving credit facility, according to the statement. SONGA OFFSHORE SE hired Citigroup Inc. to issue $200 million of seven-year bonds, according to a person familiar with the transaction who declined to be identified because terms aren’t set. The company is issuing the notes to repay existing debt and for general corporate purposes, it said in a statement. After the offer is completed, Songa Offshore expects to exchange its outstanding fixed-rate bonds due 2011 and floating-rate notes due 2012 for additional notes, according to the statement. CNG HOLDINGS INC., a check cashing service in the U.S. and U.K., plans to sell $200 million of five-year senior secured notes yielding 13.399 percent to 13.657 percent as soon as today, according to a person familiar with the offering. Proceeds will be used to repay debt and for general corporate purposes, said the person, who declined to be identified because terms aren’t set. The debt was rated B by S&P, according to a Jan. 25 report. PT CILIANDRA PERKASA, an Indonesian palm-oil company, may sell dollar bonds, a person familiar with the matter said. Ciliandra is a unit of Singapore-based First Resources Ltd . AO ASTANA FINANCE will offer senior creditors $350 million of new bonds, as well as recovery notes and 58.9 percent of voting shares, the lender said in a statement published through the Kazakhstan Stock Exchange. Holders of Astana Finance’s domestic notes will be offered 20-year tenge-denominated bonds with an 8 percent coupon, the lender said in the statement, which was dated Oct. 16. The DOMINICAN REPUBLIC may sell as much as $600 million of bonds, said Roberto Cabanas , head of general financing at the Public Credit Office. The government hired Barclays Plc and Citigroup Inc. to arrange the country’s first international dollar bond sale in more than three years. The country is rated B2 by Moody’s and B by S&P. Offerings in Pipeline BANK OF CHINA LTD. , the country’s third-largest lender by market value, plans to sell 10-year dollar-denominated bonds to repay debt. Bank of China, Deutsche Bank AG and UBS AG will arrange the transaction, the Beijing-based bank said in a statement. Bank of China said it will use proceeds of the sale to repay a $2.5 billion credit facility. Moody’s Investors Service assigned an A1 rating to the bonds, the fifth-highest investment grade. RUSSIA will choose banks to manage the government’s first foreign bond sale in more than a decade as early as this week, Finance Minister Alexei Kudrin said. The government on Dec. 24 named 22 banks including Deutsche Bank AG, Goldman Sachs Group Inc., Renaissance Capital and VTB Capital to its shortlist for organizing the sales. Russia plans to use the money it raises to plug a budget gap that may swell to 6.8 percent of gross domestic product, Kudrin said today. BES INVESTIMENTO DO BRASIL plans to sell dollar bonds in overseas markets, said a person familiar with the transaction. Banco Espirito Santo SA, Deutsche Bank AG and Standard Bank Group Ltd. are arranging the five-year bond, said the person, who declined to be identified because terms aren’t set. LITHUANIA may price its planned benchmark issue of 10-year dollar bonds to yield 7.625 percent, according to a banker with knowledge of the transaction. BAHRAIN, the smallest oil producer among the six Gulf Arab states, plans to issue a $1 billion 10-year conventional bond. It’s too early to appoint managers for the sale, which will help the country finance its budget, a spokeswoman for the country’s central bank said. PUGET SOUND ENERGY INC., a unit of Puget Energy Inc., plans to sell $800 million of senior notes, the Bellevue, Washington- based company said in a Securities and Exchange Commission filing . The filing didn’t specify the maturity or yield of the debt. BIRCH COMMUNICATIONS INC. is offering $100 million of senior secured notes due in 2015, with proceeds going toward refinancing debt, buying outstanding warrants for its common stock and general corporate purposes, including acquisitions, the Atlanta-based company said Nov. 30 in a statement . On Feb. 1, Moody’s Investors Service withdrew its B3 rating assigned to the company’s notes, citing “recent indications” that Birch “will complete its note issuance under terms that are different than those that supported the rating assignment,” analysts Gerald Grnovsky and Russell Solomon wrote in a note. Birch is rated B- by S&P, the ratings company wrote Dec. 4 in a statement. “We’re currently holding discussions with interested parties and expect to finalize our offering in the near term,” Greg Corwin , director of marketing for Birch, said in a Jan. 11 telephone interview. (Updated Feb. 2. See http://www.birch.com/about/ ) VIETNAM SHIPBUILDING INDUSTRY GROUP, the state-owned company known as Vinashin, won government approval to sell as much as $600 million of bonds overseas to fund construction of ships. Vinashin plans to raise between $400 million and $600 million in a dollar-denominated bond sale, “hopefully” in the first quarter “and with a government guarantee,” Chief Business Officer Nguyen Quoc Anh said in a phone interview from the northern port province of Quang Ninh. ANGOLA, which vies with Nigeria as Africa’s biggest oil producer, may sell from $500 million to $1 billion in its first international bond sale, assuming it receives a B rating from S&P and Fitch Ratings, according to Exotix Ltd. Angola previously sought to sell $4 billion of debt in an offering first announced in August. The deal was later postponed. JPMorgan Chase & Co. ’s South African unit is managing the deal. ALROSA, Russia’s diamond monopoly, may sell as much as $1 billion in foreign-currency bonds in the second half of 2010, RIA Novosti reported, citing Chief Executive Officer Fyodor Andreyev . The company is rated Ba3 by Moody’s. To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net .
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Kraft Foods Said to Plan $4 Billion Debt Sale to Pay for Cadbury Takeover
