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Unilever bonds have fallen sharply this afternoon, with markets anticipating an impact on the company’s debt if an acquisition from Kraft Heinz were to go through.

A €700m bond fell from 102 cents on the euro to 97 cents in early afternoon trading, before edging higher to 99 cents. The bond matures in 2028.

Unilever’s bonds are moving on market expectations of the consequences of an acquisition, which could lead to an increase in the company’s overall leverage.

The slight recovery in the price came after Unilever clarified its rejection of the offer of $50 per share in cash and stock.

Kraft Heinz’s share price is still rising, and is 8.1 per cent up on the day. Unilever is up 11.6 per cent, slightly below the highs it hit earlier this afternoon.

Senior Moody’s analyst Ernesto Bisagno said on Friday that the Kraft Heinz offer would be a credit negative for Unilever bondholders, “as 2017 pro-forma combined leverage would likely rise significantly – excluding cost savings and synergies – from the moderate 2.0x Unilever currently shows on a standalone basis.”

“Also, Kraft Heinz’s current rating is Baa3 and thus five notches lower than Unilever’s A1 rating,” he added.

Chart courtesy of Bloomberg

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