Kraft Heinz Taps as Much as $4 Billion of Credit Line
Kraft Heinz Taps as Much as $4 Billion of Credit Line
(Bloomberg) -- Kraft Heinz Co. is planning to draw down as much as $4 billion from its revolving credit facility, a month after the food giant’s credit rating was cut to junk, according to people familiar with the matter.
The move comes as companies from planemaker Boeing Co. to casino operator Wynn Resorts Ltd. tap into their backup credit lines and other loans to bolster cash positions amid the worst credit-market turmoil since the 2008 financial crisis. Firms are stockpiling cash as the coronavirus pandemic shuts down broad swaths of the economy.
“The demand for our brands, our cash flow and our balance sheet remain strong,” a Kraft Heinz spokesman said in response to an inquiry without commenting directly on its credit line. “As a matter of practice, we typically maintain a conservative liquidity posture, which is even that much more important as we focus on making sure all our products remain available to the public during these challenging times.”
A spokesperson for JPMorgan Chase & Co., the agent bank on the $4 billion revolving loan, declined to comment.
The consumer-foods company was cut below investment grade last month by S&P Global Ratings and Fitch Ratings and warned shortly after that the downgrades may limit its access to financing sources such as the commercial paper market, requiring it to use alternative funding sources such as its senior credit facility.
Kraft Heinz said in a regulatory filing last month that it had no commercial paper outstanding at the end of 2019 and that the maximum amount it held during last year was $200 million.
“We maintain our $4.0 billion senior credit facility, and subject to certain conditions, we may increase the amount of revolving commitments and/or add additional tranches of term loans in a combined aggregate amount of up to $1.0 billion,” the company said.
Created in a merger five years ago orchestrated by Warren Buffett’s Berkshire Hathaway Inc. and private equity firm 3G Capital, Kraft Heinz is in the midst of a turnaround as its brands fall out of favor with consumers. Its shares have fallen about 16% in the past month, less than the decline of the S&P 500 Index, amid ongoing consumer demand for food and beverages.
Read more about Kraft Heinz’s downgrade to junk
--With assistance from Jacqueline Poh.
To contact the reporters on this story: Gillian Tan in New York at gtan129@bloomberg.net;Paula Seligson in New York at pseligson@bloomberg.net
To contact the editors responsible for this story: Natalie Harrison at nharrison73@bloomberg.net, ;Alan Goldstein at agoldstein5@bloomberg.net, Shannon D. Harrington, Dan Reichl
©2020 Bloomberg L.P.