Mars Inc. is seeking financing to pay off the balance of $4.4 billion of bonds provided by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) in 2008 to acquire Wm. Wrigley Jr. Co., two people with knowledge of the matter said.
The maker of M&M’s candies plans to save money by refinancing the 11.45 percent senior subordinated notes at a lower rate before they’re due in 2018, said one of the people, who asked not to be identified because the transaction is private. Mars may be able to borrow 10-year debt for less than 6 percent, Bank of America Merrill Lynch index data show.
The bonds are callable prior to maturity at par plus a prepayment premium applicable at the time, according to a regulatory filing from Berkshire.
Berkshire backed Mars’s $23 billion purchase in October 2008 with the debt financing and an agreement to take a $2.1 billion stake in the Wrigley division once the deal closed. Berkshire would still be left with its equity stake in Wrigley and the preferred shares can’t be sold for another year, one of the people said.
Ryan Bowling, a Mars spokesman, declined in an e-mail to comment on the bonds. Buffett didn’t respond to a request for comment sent to an assistant.
Wrigley’s long-term rating is Ba1, the highest level of speculative grade, at Moody’s Investors Service. The average yield to maturity as of yesterday was 5.92 percent on the Bank of America Merrill Lynch 7-10 Year BB U.S. Cash Pay High Yield Index.
McLean, Virginia-based Mars, founded in 1911, has net sales of more than $33 billion, according to its website.