The same liquidity crisis in the debt markets that caused yesterday's 3.2% drop on the FTSE means that Cadbury's now faces the humiliation of being unable to complete the $7bn drinks biz sale because the private equity consortia who are bidding for it can't raise the debt they need to do the deal. Rather like someone who 'sells' their house only to discover that their 'buyer' has no mortgage in place and fading hopes of getting one, on account of being a self-employed trapeze artist with a bad case of vertigo.
Cadbury's - which also recently announced 7,500 job cuts globally - has said that it is extending the timetable for the sale, having already dropped the price from $8bn to $7bn. It hopes that this will allow 'bidders to complete their proposals against a more stable debt financing market'.
Well, we hope so for their sake but it seems to us here at MT that things are likely to get worse before they get better. You don't have to understand the intricacies of securitisation, collateralised debt obligations and credit default swaps, to realise that the days of cheap borrowing and benign economic circumstances are coming to an end.