Summary
- Kraft Heinz was slashed by one-third in three days.
- Will the company lose its investment-grade credit rating?
- This article discusses the critical metric to watch.
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In Kraft Heinz: Buy or Sell?, I discussed what happened, explained what it meant, and ended my article with a recommended entry point.
In this article, I dig deeper into the company's biggest risk: Debt.
When Things Don't Go As Planned
On March 25, 2015, working with Warren Buffett's Berkshire Hathaway (BRK.A) (BRK.B), 3G Capital, a Brazilian private investment group, announced that it would merge Kraft with Heinz, the condiment and canned foods giant it acquired with Mr. Buffett in 2013.
The combined company was "expected to have a market value of more than $80 billion," but four years later, Kraft Heinz (KHC) is valued at half of that level, and as a result, the company's debt looks problematic to the market.
Balance Sheet
One key observation about the company's balance sheet is that the majority of assets are comprised of goodwill and intangible assets:
