Cadbury Schweppes today announced it has secured $3.8 billion in financing to finally demerge its confectionary and US drinks arms, nearly a year to the day after the company first revealed plans to split the two groups.

The company is expecting to demerge its confectionary group and its beverages arm, which will be known as Dr Pepper Snapple Group (DPSG), on May 7 after a group of five banks agreed to fund the deal.

Immediately prior to the split, Cadbury Schweppes will have £3.2 billion in debt. After the split, Cadbury Plc, the confectionary business, will have £1.65 billion in debt which will be financed through its existing borrowing facilities.

JP Morgan Chase, Bank of America, Goldman Sachs Credit Partners, Morgan Stanley and UBS will provide $3.8 billion to DPSG, to ensure the division is awarded investment grade status that will allow it to raise $2 billion though a bond issue immediately after the split.

In total, the $3.8 billion funding package provided by the banks to DPSG includes $1.4 billion debt, $2 billion in bridge funding that will be refinanced through the bond issue and a $500 milllion credit facility which will immediately be reduced to $400 million by $100 million on DPSG's balance sheet.

Cadbury Schweppes will still pay out a final dividend to shareholders, but is sticking to plans not to make an additional return to shareholders.

In March last year, Cadbury Schweppes announced it was splitting the business in two with hopes it would sell off the US soft drinks business.

However, a sale became less likely as the credit crunch spread through global markets, scaring potential bidders, and their financiers away from making large acquisitions.

Subsequently in October, Cadbury Schweppes announce it would demerge the two groups.

A spokeswoman at Cadbury Schweppes denied that the company had experienced difficulties in raising finance for today’s deal because of the credit crunch.

Though she admitted that the company's own caution about the state of the credit markets had prompted it to secure definitive credit agreements from the five banks instead of the usual commitment letter, which state financiers' intention to lend to a company.

Cadbury Plc will be listed on the London Stock Exchange while DPSG will be listed in New York.

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