Junk food, junk bonds: Burger King + doughnut chain

Standard & Poor's is threatening to cut Burger King Corp.'s credit rating, already a junk-level B+, to plain B (highly speculative) on the strength (or weakness) of BK's plan to merge with coffee-and-doughnut vendor Tim Horton's of Canada, because the deal will push the combined company even further in debt.

"The proposed acquisition will increase consolidated debt substantially for the Burger King – Tim Horton entity and weaken credit protection measures compared with either company currently," S&P said in its statement summarizing the report from a team headed by analyst Charles Pinson-Rose. S&P said it will review what the merger will mean for the companies' credit and the likelihood lenders and investors will get their money back before deciding whether to downgrade.

Burger King "indicated its financing plans consist of about $9 billion in funded debt and $3 billion of preferred equity financing commitment provided by Berkshire Hathaway," billionaire Warren Buffet's insurance-railroad-investments holding company, S&P noted. Consolidated debt (leverage) will rise to several times income, from the current 4x, S&P estimates.