By Dena Aubin
NEW YORK (Reuters) - Kraft Foods (Kraft Foods Inc) is planning to sell a minimum of $4 billion (2.5 billion pounds) in bonds in four parts on Thursday to help finance its $18.7 billion acquisition of British chocolatier Cadbury, IFR said on Wednesday.
The sale is expected to include 3.25-year, 6-year and 10-year notes and 30-year bonds, each a minimum of $1 billion in size, a banker close to the deal said.
Depending on the price, "I would anticipate pretty decent demand," said Richard Lee, head of fixed-income at broker-dealer Wall Street Access in New York.
The tone in the corporate bond market has been a little stronger since Tuesday, "with a little more confidence in the market...on a combination of things," said Lee.
Expected yields on the offering are about 150 basis points over Treasuries on the 3.25-year notes and about 187.5 basis points over Treasuries on the six- and 10-year notes, according to IFR, a Thomson Reuters service. The 30-year bonds are expected to yield about 15 basis points more than the 10-year notes.
BNP Paribas, Citigroup, Deutsche Bank, HSBC and RBS are joint lead managers on the sale.
Kraft won control of Cadbury on Tuesday as holders of almost 72 percent of Cadbury's stock accepted the takeover that will create the world's biggest confectioner. Kraft needed just 50 percent plus one share to acquire Cadbury.
Kraft has commitments for a 7.1 billion pound bridge loan to temporarily finance the Cadbury acquisition. Commitments for the bridge loan are expected to be reduced by the amount raised in this week's bond sale, Moody's Investors Service said in a statement on Wednesday.
Moody's rates Kraft's new senior unsecured bond issue Baa2, its second-lowest investment grade. The issue is expected to be rated BBB-minus by Standard & Poor's, its lowest investment grade.
S&P on Tuesday downgraded Kraft by two notches, saying the debt being taken on to purchase Cadbury will weaken Kraft's credit quality. However, S&P assigned a positive outlook, saying it could upgrade Kraft if it successfully integrates Cadbury and improves credit measures.
Moody's on Tuesday confirmed Kraft's rating, saying it expects the company to generate sufficient cash flow to restore its credit quality in less than two years. However, Moody's assigned a negative outlook to the rating, citing a risk that Kraft will not quickly reduce leverage "given its history of unfavourable shifts in financial policy."
To keep its rating, Kraft will need to have a disciplined and far more conservative financial policy over the next 18 to 24 months, Moody's senior analyst Brian Weddington said in a statement.
"This would include devoting the vast majority of its discretionary cash flow to debt reduction," he said.
Kraft will likely be downgraded if it resumes share repurchases or leveraged acquisitions before it restores its credit quality, he said.
(Additional reporting by Caryn Trokie and John Parry in New York and Alex Chambers in London; Editing by Kenneth Barry)