AB InBev’s debt insurance surges

THE cost of insuring Anheuser-Busch InBev’s (AB InBev’s) debt is surging on concern that the Belgian brewer may need to borrow a record amount of debt to buy SABMiller.

THE cost of insuring AnheuserBusch InBev’s (AB InBev’s) debt is surging on concern that the Belgian brewer may need to borrow a record amount of debt to buy SABMiller.

Credit-default swaps (CDS) on AB InBev rose to a three-year high of 86 basis points from 66 basis points on September 15, the day before it approached its South African competitor. The contracts exceed those of its smaller rival by a record 23 basis points, compared with five basis points last month.

SABMiller has snubbed three takeover proposals as too low, including a potential offer of £65bn on Wednesday, despite support for the overture from its largest shareholder. The offer would require AB InBev to borrow about $64bn of new debt, analysts at CreditSights wrote on Wednesday. “The CDS market appears to be concerned over AB InBev’s continued efforts to acquire competitor SABMiller with its latest bid of over $100bn,” Diana Allmendinger, a director at Fitch Solutions, wrote on Wednesday.

AB InBev had lined up banks, including Bank of America and Banco Santander, to arrange as much as $70bn in financing for the deal, people familiar with the matter said last month. It planned to use bridge loans from banks that it would refinance in the bond market, chief financial officer Felipe Dutra said on Wednesday.

The deal might end up being the fourth biggest acquisition of all time if it goes through.