Gum king Wrigley to issue bonds for first time in 114-year history

Aim is to finance purchase of Kraft candy brands

April 07, 2005|By BLOOMBERG NEWS

NEW YORK - Wm. Wrigley Jr. Co., the world's largest chewing-gum maker, plans to issue bonds for the first time in its 114-year history to finance the purchase of brands including Life Savers and Altoids from Kraft Foods Inc.

Wrigley, which first sold shares to the public 88 years ago, will sell $1 billion in debt and borrow $1.5 billion in the commercial paper market for the first time, according to a report by Standard & Poor's. Commercial paper is debt that matures in nine months or less.

Wrigley, based in Chicago, could find strong demand for the securities because it is a new, nonfinancial issuer rated in the middle tier of investment grade, some investors said.

Finance companies have accounted for about 73 percent of the debt sales this year, up from 68 percent last year and 56 percent in 2001, according to Bloomberg data.

Wrigley's offering "will be received positively," predicted Denise Latchford, who manages $2.5 billion in money-market funds at American Century Investment Management in Mountain View, Calif. "People would like to see new corporate names."

Yield premiums on corporate bonds are the widest in seven months. The extra yield, or spread, that investors demand to buy investment-grade company bonds widened 12 basis points to 93 basis points last month. A basis point is 0.01 percentage points.

The market for corporate bonds worsened after General Motors Corp., the biggest automaker and one of the five-largest corporate debtors in benchmark indexes, forecast a first-quarter loss March 16.

According to data from Merrill Lynch & Co. Inc., March was the worst month for corporate bonds since September 2002. On Tuesday, corporate bond spreads expanded 1 basis point to 94 basis points, the widest since Sept. 6.

Wrigley spokeswoman Kelly McGrail declined to comment yesterday on what maturities the company will choose for its notes, which underwriters will manage the bond sale or when the sale will occur.

Wrigley is the maker of Spearmint, Juicy Fruit and Doublemint, Big League Chew and Big Red chewing gums. In November, it agreed to pay $1.48 billion for most of Kraft's candy business, and it plans to increase sales by distributing them in more than 180 countries.

S&P rated Wrigley debt A+, the fifth-highest of 10 investment grades. Its commercial-paper program was rated A-1, the second-highest grade. Companies use commercial paper for expenses such as funding acquisitions and building inventory.

"It is a very strong company, and they've got a leading market presence in gum," said Todd Duvick, a bond analyst at Bank of America Corp. who covers consumer-product companies.

"With this kind of credit, it's probably going to be priced rich. I would be very surprised if it wasn't oversubscribed," said Duvick, meaning Wrigley will probably get more orders for the notes than it needs to borrow.

Wrigley plans to raise $1.5 billion in the commercial-paper market. It would then reduce the amount outstanding to about $600 million, according to the S&P note.

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