UPDATE:Banks Financing Kraft's Cadbury Bid May Grow To 18-Source

The number of banks involved in the financing for Kraft Foods Inc.'s (KFT) bid for Cadbury PLC (CBY) could expand to 18, a person familiar with the matter said Friday.

The bridge loan is estimated to be GBP5 billion to GBP5.5 billion (about $9 billion), and is arranged by Citigroup Inc. (C), Deutsche Bank AG (DB) and HSBC Holdings PLC (HBC). A further six banks will join the leading trio, including BNP Paribas SA (BNP.FR), Barclays Capital, Royal Bank of Scotland Group PLC (RBS) and Credit Suisse (CS), according to several people familiar with the matter. The leads are expected to cast the net even wider, one of these people said, with Mizuho Securities, the investment banking unit of Mizuho Financial Group (MFG), and Calyon, the investment banking arm of French bank Credit Agricole SA (ACA.FR), also likely to be among the banks playing a role.

It's unclear if all the new funds would go toward financing the offer. Another person familiar with the matter indicated previously that some of the money could be used to pay down existing debt or go toward a revolving credit facility.

Corporate bonds would replace the bridge loan, with the banks likely to sell the bonds in several different currencies, tapping the dollar, euro and sterling markets. This would match any new debt with the revenue bases of the merged entity, as well as with the existing currency mix of both Cadbury and Kraft's capital structures.

Under U.K. law, Kraft, of Northfield, Ill., must make a formal offer for Cadbury by Monday or walk away for six months. In September, Cadbury immediately rejected Kraft's cash and stock bid, then valued at GBP10.2 billion ($16.9 billion).

While Kraft's decision to pursue Cadbury was met by stockholders without enthusiasm, judging by Kraft's falling shares, banks have been eager to extend funds. The relationship would lead to lucrative business with the merged company, such as future loan facilities, share sales, mergers and acquisitions and refinancing mandates further down the line.

The cost of protecting senior bonds of Kraft and Cadbury has remained in range over the past week. It costs $85,000 a year to protect $10 million of Kraft bonds for five years, according to CMA DataVision, and $61,000 for Cadbury. Kraft bonds were mixed in thin trade, according to online trading platform MarketAxess.

Kraft shares were recently trading at $26.90, about a 4% drop from before the bid was announced.

Kraft couldn't immediately be reached for comment. The banks couldn't be immediately reached for comment.

-By Kate Haywood and Romy Varghese, Dow Jones Newswires; 212-416-2218; [e-mail]

(Carol Dean in London and Anjali Cordeiro in New York also contributed to this article.)