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Kraft Foods in debt sell-off

Kraft Foods, recently confirmed as the proud owner of Cadbury, will this week be selling off debt to investors in tranches of no less than $1 billion. In effect the company is looking to refinance the debt it took on in connection with the Cadbury deal with the bonds expected to have a life of 3.25 years, six years, 10 years and 30 years.

Investors in Kraft Foods recently saw the company's credit rating downgraded two notches by S&P, something which some of the larger investors in the company had expressed concern about. However, S&P has already put the company on a positive ratings watch with many investors expecting a sharp rebound which could see the company reclaim the two notches it has lost on the credit rating scale.

The company is confident of creating more than sufficient cash flow to cover its growing debt interest payments which should help with a rerating of the company's credit rating in the short term. It is interesting to see that Kraft Foods has been very swift with its response to the debt situation after only officially gaining control of Cadbury yesterday. However, this does reflect the need to respond to market conditions as quickly as possible in the current economic climate.

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