Kraft Sells Bonds To Buy Cadbury (KFT, CBY, BRK.A, BNI)

Expansions and acquisitions are fueling an increase in bond sales in the US in a manner not seen in over a decade.

Kraft Foods Inc (NYSE: KFT) raised $9.5 billion in bond sales to finance its purchase of Cadbury Plc (NYSE: CBY) while Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A) financed the purchase of Burlington Northern Santa Fe Corp (NYSE: BNI) by sales of $8 billion of notes.

It is estimated that 70% of all the debt raised by non financial companies in the US was for merger and acquisition purposes. The pace of this bond sale was the fastest in any five-week period after 1998.

Companies are also taking advantage of the lowest borrowing costs since 2004. “It’s the resumption of business sales growth that has improved the backdrop for M&A,” said John Lonski, chief economist at Moody’s Capital Markets Group. “Financing costs are relatively cheap if you can access credit.”