Skip to comments.Junk Bond-Flavored Ketchup: Buffett’s Leveraging of Heinz into Orbit
Posted on 02/21/2013 4:45:13 PM PST by whitedog57
Billionaire Warren Buffett loves Heinz ketchup with his hash browns so much that he is driving Heinz into junk status. Maybe he actually likes Hunts Ketchup better.
His love of ketchup and hash browns is transforming H.J. Heinz Co. into the most-leveraged food maker in America.
Buffetts Berkshire Hathaway Inc. and 3G Capital Inc.s $2 billion acquisition of Heinz may double the companys total debt to five times earnings before interest, taxes, depreciation and amortization, according to Fitch Ratings, the highest of any comparable food company. The cost to protect Heinzs debt from losses soared to a record after the announcement.
Fitch Ratings has downgraded the ratings of H.J. Heinz (Heinz: NYSE: HNZ) and its subsidiaries following the firms announcement that it had entered into a definitive agreement to be acquired by a consortium comprised of Berkshire Hathaway and 3G Capital. Fitch also placed Heinzs ratings on Watch Negative. Additional downgrades could occur upon review of final financing terms and the firms capital structure once the deal is consummated.
Heinz, which said in a Nov. 20 regulatory filing that it had about $5.04 billion of total debt at the end of October, obtained $14.1 billion in financing from JPMorgan Chase & Co. and Wells Fargo & Co. to support the deal, according to a Feb. 15 filing.
Heinz stock price jumped to 72.19 as of 4:30pm today.
And allegations have arisen over insider trading on Heinz options. Here is the price path of a Heinz call option with a 65 strike.
Finally, here is the Heinz volatility surface.
But Heinz credit default swaps (CDS) surged to 211.85. The spike in the CDS even looks like a blue bottle of Heinz ketchup.
Here is Heinz stock price and 1 year default likelihood on the same chart.
Here is a Heinz sign symbolizing the draining of cash flow to support the massive debt.
At least interest rates are so low that we are likely to see even more cheap money acquisitions.
Hey Warren! Next time just buy a BIG container of Heinz ketchup for your hashbrowns rather than sinking a company up to its eyeballs in debt.
This greedy bastard will bankrupt an American icon like Heinz by levering to the hilt to get a couple more bucks out of it, then write another article on the front page of the Wall Street Journal moaning about how he wants to be taxed more (which he knows will never happen) to stay on the Liberal Establishment’s good side. People like him are worse than Robber Barons. At least the Robber Barons weren’t hypocrites like this scumbag.
>>This greedy bastard will bankrupt an American icon like Heinz by levering to the hilt to get a couple more bucks out of it, then write another article on the front page of the Wall Street Journal <<
FR hates millionaires now? If he can pull this off, then more power to ‘im!
Not millionaires. Just hypocritical scum like Buffett.
The new Robber Barons are overpaid, under-worked government employees.
The company will be leveraged, massive cuts in expenses will be made and then the company will be taken public in 3 years at a massive profit. The Brazilians that are working with Buffett are notorious for cost-cutting and making money for themselves and their investors and lenders.
Hunt’s ketchup is better.
That right there is how Capitalism is defiled.
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