Kraft Heinz Foods eyes multi-currency bond

(Adds details on US marketing)

By Natalie Harrison

NEW YORK, June 11 (IFR) - HJ Heinz and Kraft Foods (Sao Paolo: KFGI34.SA - news) are looking into issuing debt in multiple currencies such as sterling, euros, Canadian dollars and US dollars by the end of June to fund their planned merger.

The companies, which will be re-branded Kraft Heinz Foods Company, said Thursday they had mandated Barclays (LSE: BARC.L - news) and JP Morgan as global coordinators to arrange meetings with fixed-income investors.

The company will begin marketing in the US next Wednesday and Thursday, and move to the UK on Friday and continental Europe the following Monday for a potential euro and sterling denominated deal, one banking source said.

"We expect it to be an expedited process in terms of when the deal will be launched," the banker said.

"Unlike most M&A transactions, there is no bridge financing in place, but you can expect the bond to be launched at any point the week after next."

The total debt issuance is expected to be in the region of US$9bn-equivalent, four banking sources with knowledge of the details said.

"There is no official size, but after the merger, Heinz will have about US$9bn of debt outstanding that will need to be refinanced," another banker said.

Goldman Sachs (NYSE: GS-PB - news) and Morgan Stanley (Xetra: 885836 - news) are also involved in the European meetings, while Citi and Wells Fargo (Swiss: WFC.SW - news) are involved in the US meetings.

The US$46bn merger of cheese giant Kraft and ketchup maker Heinz, backed by Warren Buffett's Berkshire Hathaway (Sao Paolo: BERK34.SA - news) and Brazilian private equity firm 3G Capital (Other OTC: CGHC - news) , was announced in March.

It will create the third-largest North American food company.

Berkshire and 3G are helping to finance the deal with US$10bn of equity.

Canadian regulators approved the merger this week, but it is still subject to approval by Kraft shareholders.

Kraft is due to hold a special meeting of shareholders to vote on the deal on July 1.

If the bond is announced later this month, the jumbo deal, likely to be rated Baa3/BBB- by Moody's and S&P, will add to a M&A financing driven record supply in the US investment-grade bond market this year.

Just this week, two jumbo M&A deals in the tobacco sector priced for Reynolds American (NYSE: RAI - news) and British American Tobacco (LSE: BATS.L - news) .

But after a surge in government bond yields this week, global credit markets are showing signs of strain and execution of trades has become tougher.

Issuers are still able to raise sizeable volumes but are being asked to pay up double digit new issue concessions, particularly on long-dated bonds.

So in short, Heinz and Kraft may have to pay up if the issuer decides to issue long-dated bonds.

Reynolds, for example, paid a 30bp new issue concession on its 30-year bond this week, and since its trade on Tuesday, US corporate bond issuers have stuck to 10-year maturities or shorter.

"(Heinz/Kraft) are targeting all markets so they have more ability to pick and choose depending where demand is," said the second banker. (Reporting by Natalie Harrison and Laura Benitez; Editing by Shankar Ramakrishnan)