Kraft Seeking Financing for Cadbury Bid

NORTHFIELD, Ill. (TheStreet) -- Kraft Foods(KFT) is in talks with two banks to set up about $8 billion in financing for its offer to buy Cadbury(CBY), a report says.

Bloomberg reports Citigroup(C) and Deutsche Bank(DB) are working on setting up debt financing to cover about half of Kraft's offer to buy Cadbury. The news agency cited two people with knowledge of the matter.

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, Bloomberg reports. Bank officials declined to comment.

The Wall Street Journal reports Kraft is working to arrange financing and firm up its proposal, which could take as much as six weeks.

Kraft made its $16.7 billion offer to buy the U.K. candy maker on Monday but Cadbury swiftly rejected the offer saying it "fundamentally undervalues" Cadbury and its prospects.

Analysts say Kraft may have to raise its offer after Cadbury's board rejected it as too low.

Moody's Investor Service, meanwhile, said it may downgrade the debt rating of Kraft, following its bid to Cadbury. Kraft's Baa2 long-term rating and Prime-2 short-term rating are under review.

Moody's Tuesday said Kraft's debt metrics are already weak and a buyout of Cadbury would require Kraft to take on more debt. Moody's also noted that Kraft may need to raise its bid to close the deal.

-- Reported by Joseph Woelfel in New York .

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