The credit crunch sweeping the international markets claimed its latest victim as Cadbury Schweppes delayed the £7 billion-plus sale of its US drinks arm just days before it was due to enter the final stages.

The maker of Dr Pepper and Snapple drinks described the leveraged debt markets as suffering "extreme volatility in recent days" as its extended the timetable for the deal.

Final bids were originally due next week, according to sources, who said Cadbury's would now wait until market conditions had settled sufficiently to enable the buyers to raise debt funding to back their purchase.

"It's the volatility of it; it's hard for them to pin the financing down, it puts them in a crunch situation," one source said.

To all intents and purposes, the debt markets have shut down this week, with bankers and fund managers worried about the risk of suffering losses as the crisis in sub-prime mortgages spreads to the wider credit markets. One hedge fund manager this week said the market "sensed there is blood in the water".

"A decision has been taken to extend the sale timetable to allow bidders to complete their proposals against a more stable debt financing market," Cadbury's said.

Sources said Cadbury's was not under timing pressure to complete the sale, first unveiled in mid-March.

First-round bids for the high-profile sale were submitted in mid-June, with around a dozen potential buyers moving forward into the second round.

Now, just two consortia remain in the process, although Cadbury said interest was still "strong" and suggested there was still a chance more buyers might emerge.

Bain Capital Partners, Thomas H Lee Partners and Texas Pacific Group are members of one consortium, while Blackstone, Kohlberg Kravis Roberts and Lion Capital make up the second.

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