Cadbury’s acquisition causes its credit protection to rise

Both Moody’s and Standard & Poor’s downgraded Cadbury Scweppes to Baa2/BBB with stable outlook from A2/A with negative outlook. The move followed Cadbury’s agreement to purchase Adams from Pfizer for $4.2 billion cash. Both agencies cited concerns about the increase in Cadbury’s debt from $1.6 billion to $4.4 billion.

The cost of five-year credit default swaps on Cadbury Schweppes widened 15bp immediately on the news to 73/83bp, trading a few basis points wider at 75/85bp today.

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