Heinz Gets $14.1 Billion Financing for Berkshire, 3G Buy
H.J. Heinz Co. obtained $14.1 billion in financing from JPMorgan Chase & Co. and Wells Fargo & Co. to support the ketchup maker’s $23 billion buyout by Warren Buffett’s Berkshire Hathaway Inc. and 3G Capital.
The debt will consist of $8.5 billion in term B portions and $2 billion of B slices split between euros and pounds, a $1.5 billion revolving line of credit and $2.1 billion in bridge facilities, Heinz said today in a regulatory filing.
The financing is the biggest a company plans to fund an acquisition since Energy Future Holdings Corp. took on $24.5 billion in debt when KKR & Co. and Texas Pacific Group purchased it in 2007, according to data compiled by Bloomberg. Fitch Ratings today cut its grade for Heinz to junk saying the company’s debt levels could double and put its existing noteholders at risk.
“Fitch’s views this substantially higher level of financial risk as not being commensurate with an investment grade rating,” analysts led by Judi M. Rossetti wrote in the report. “New debt issued to finance the transaction may have better terms than those of Heinz’s existing public notes.”
Fitch cut its grade on Heinz three levels to junk, to BB+ from BBB+, saying the ratio of debt to earnings before interest, taxes, depreciation and amortization, could double, to 5 times from 2.5 times as of Oct. 28, the ratings company wrote in a report today.
Heinz had about $5.04 billion of total debt as of Oct. 28, the company said in a Nov. 20 regulatory filing.
Moody’s Investors Service yesterday put Heinz on review for a cut, citing higher leverage after the deal. Moody’s has a Baa2 grade on Heinz. Standard & Poor’s also placed its investment- grade BBB+ rating on Heinz under scrutiny for reduction.
“The transaction would weaken Heinz’s credit protection measure well below current levels,” S&P analysts led by Bea Chiem wrote in the report.
The purchase valued at $28 billion, is the largest ever in the food industry, Pittsburgh-based Heinz and Omaha, Nebraska- based Berkshire said in a statement yesterday distributed by Business Wire.
A term loan B is sold mainly to non-bank lenders such as collateralized loan obligations. In a revolving line of credit, money can be borrowed again once it’s repaid; in a term loan it can’t.
Bridge facilities are short-term loans that usually mature in one year and are often used as backstops to bond offerings or longer-dated bank debt.
To contact the reporter on this story: Krista Giovacco in New York at firstname.lastname@example.org.
To contact the editor responsible for this story: Faris Khan at email@example.com.
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.