July 27 (Bloomberg) -- Cadbury Schweppes Plc became the first company to delay an acquisition because of ``extreme volatility'' in debt markets this month that has hampered leveraged buyouts.

The world's largest candy maker extended the deadline for selling its U.S. drinks division, saying there's still ``strong'' interest from potential buyers. Final bids for the unit, which makes Dr Pepper and 7 Up soda, were due within the next week, people familiar with the matter said on July 25.

Global stock markets have fallen 5 percent this week, the biggest drop since July 2002, according to the Morgan Stanley Capital International World Index. Kohlberg Kravis Roberts & Co.'s bankers failed to find buyers for $10 billion of loans to pay for Alliance Boots Plc, raising concern that LBO firms will struggle to secure funding for future transactions.

``Lately, we've had a real shutdown of people's willingness to finance these kind of deals,'' said Colin Symons, chief investment officer at Symons Capital Management in Pittsburgh, which handles $300 million. ``That's why Cadbury-Schweppes just wanted to extend the deadline.''

The timetable for the auction is being reviewed, London- based Cadbury said today. The maker of Trident gum and Dairy Milk chocolate said in March that it would sell or spin off the unit following pressure from investors including Nelson Peltz.

It plans to use proceeds from the unit, which controls 15 percent of the U.S. soda market, to fund candy expansion in Asia and Europe and return cash to investors. A deal would unwind 38 years of acquisitions from Canada Dry to Snapple.

Shares Rise

Two buyout groups vying for the division may offer less than planned, four people with knowledge of the bidding said this week. Martin Deboo, an analyst at Investec Securities in London who has a ``hold'' rating on the stock, yesterday cut his estimate for the sale price to 7.2 billion pounds ($14.7 billion) from 8 billion pounds.

Cadbury's stock rose 14 pence, or 2.4 percent, to 603.5 pence, the most in six weeks, recouping a plunge of as much as 5 percent on relief the sale wasn't cancelled, analysts said. The shares, which reached a high of 723.75 pence on May 29, have climbed about 10 percent this year.

The ``positive surprises are that the sale process is still ongoing and interest remains strong,'' Deboo said. ``The probability is that it'll go to U.S. private equity.''

The confectioner announced it would dispose of the beverage unit in March, two days after saying Peltz amassed a stake. Peltz's New York-based Trian Fund Management LP invests in companies it perceives as undervalued.

Buyout Groups

The buyout groups may bid $13 billion to $14 billion, according to the people, who asked not to be identified because the talks are private. Both teams were poised in early June to pay more than $15 billion. TPG Inc. is working with Bain Capital LLC and Thomas H. Lee Partners LP; Blackstone Group LP has joined with KKR and Lion Capital.

Cadbury appointed Goldman Sachs Group Inc., Morgan Stanley and UBS AG in March as its advisers on the possible sale.

The cost of credit-default swaps to insure corporate debt climbed to the highest in more than two years yesterday. The private-equity owners of U.K. fashion retailer New Look Group Plc have postponed a proposed refinancing of the company until debt markets improve, the Daily Telegraph reported today.

Credit-default swaps based on 10 million euros of Cadbury debt rose 12,000 euros to 65,000 euros today, according to CMA Datavision. Investors use credit-default swaps, contracts based on bonds or loans, to speculate on ability to repay debt. An increase indicates worsening perception of credit quality.

Cadbury, which reported a 34 percent drop in second-half profit last year, said in June it plans to cut 7,500 jobs, or 15 percent of the workforce at its candy unit, to boost margins. The company also raised its sales-growth target to between 4 percent and 6 percent annually for the next four years.

The company received a 1 million-pound fine from a U.K. court last month, after traces of salmonella were found in some of its chocolate bars in June 2006.

To contact the reporter on this story: Amy Wilson in London at awilson23@bloomberg.net.

Last Updated: July 27, 2007 16:59 EDT