S&P puts Kraft on watch

Standard & Poor's said it placed its A- corporate credit and BBB+ senior unsecured debt ratings on Kraft Foods Inc. on CreditWatch with negative implications.

At the same time, S&P said it placed its BBB corporate credit rating and A-2 short-term and commercial paper ratings on Cadbury plc on CreditWatch with developing implications.

"The Kraft CreditWatch placement follows the company's £10.2 billion unsolicited proposal to acquire U.K.-based Cadbury plc and combine the two companies as part of a potential cash and share offer for the group," said S&P credit analyst Mark Salierno.

"The Cadbury CreditWatch placement reflects that the company is not yet at the stage of reviewing a firm offer."

Consequently, S&P said it cannot rule out a possibility of alternative bids from a number of parties, which might create upside, as well as downside for Cadbury's credit quality.

The agency also said it believed that the substantial incremental debt that would be added to Kraft's balance sheet to fund the proposed transaction will weaken key credit metrics below expectations at the current rating level.

However, S&P said it affirmed Kraft's A-2 short-term and commercial paper ratings based on the agency's expectation that it does not anticipate lowering the corporate credit rating below BBB.

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