Moody's Cuts Kraft Outlook To Negative (KFT)

It looks like Warren Buffett may have been right in his skepticism regarding Kraft's (NYSE: KFT) acquisition of Cadbury PLC. Kraft (KFT) announced today that it has succeeded in gaining control of Cadbury, after 71.73% of Cadbury's shareholders accepted the terms of the deal.

Hours after the successful takeover was confirmed by Kraft, however, Moody's has cut the company's credit outlook to negative and confirmed its Baa2 long term rating. "The negative outlook reflects the risk that Kraft will not quickly reduce its financial leverage given its history of unfavorable shifts in financial policy," said Brian Weddington, a Moody's senior analyst. The ratings firm called for Kraft to follow a more disciplined and conservative financial stance in the coming years. "If Kraft returns to share repurchase activity or leveraged acquisitions before it has fully restored its credit metrics, a downgrade would likely occur," Weddington noted.