Credit default swaps on Rexam, the world's biggest maker of drink cans, jumped in price on Thursday as talk of a bid for the British group reverberated through the debt and equity markets.
In the European bond market's biggest sectors - telecoms and carmakers - debt in the world's biggest carmaker General Motors continued to flag, while Danish phone company TDC rallied on hopes it might escape the clutches of a potential private equity take-over.
The cost of insuring debt in Rexam against default through five-year credit default swaps rose about 20 basis points, bid at 95 basis points, one trader said, while its shares hit an all-time high in heavy volume.
The default swap price means it costs 95,000 euros ($111,900) a year to insure 10 million euros of the company's debt against default.
"There's been no news, but if you look at the credit metrics, it's one that the market thinks is ripe for a take-over or an LBO," one trader in London said.
The threat of leveraged buyouts (LBOs) has loomed large over the corporate bond market this year as private equity funds amass the firepower to take on ever-larger targets.
LBOs are funded by loading a target company's balance sheet with debt, which harms its creditworthiness and potentially leaves bondholders with risky "junk"-rated paper.
Denmark's TDC - another potential LBO target, which sources have said is being circled by two groups of private equity investors - has been the most actively traded default swap in Europe for several months.
On Thursday five-year default swaps on TDC tightened some 8 basis points, bid at 274 basis points, after comments by Swisscom were interpreted to mean the Swiss operator might potentially buy both TDC and Ireland's Eircom.
Elsewhere in the telecoms sector, default swaps on Dutch operator KPN widened 2 basis points, bid at 48 basis points, a trader said, on the back of weakness in the company's dollar-denominated cash bonds.
Among carmakers, default swaps on General Motors rose about 50 basis points to 1,040 basis points.
The company's shares hit a 23-year low in the United States after Banc of America Securities warned of an increased risk of bankruptcy at the struggling auto giant, which rattled bond markets when it fell to "junk" earlier this year.
Late on Wednesday, GM had also said it would restate its 2001 financial statements, which were overstated by as much as $400 million because of accounting errors.
But default swaps on GM financing unit General Motors Acceptance Corp (GMAC), which GM wants partly to spin off so it can regain an investment-grade rating, were less active, widening 10 basis points to 310 basis points.
In the primary market, France's Lafarge, the world's largest cement producer, sold a 500 million euro ($586.8 million) bond due 2016, meeting good investor demand for its second bond sale this year.
The deal drew some 900 million euros of orders from about 90 accounts, said Jean-Luc Lamarque at Calyon, which managed the deal with BNP Paribas, HSBC and Royal Bank of Scotland.
The bond held steady in early trade, a dealer said, usually a signal of accurate pricing and perhaps reflecting the fact the order book was dominated by buy-and-hold types of accounts: fund managers, insurers and pension funds.
The bond, due March 2016, was priced at the tight end of guidance to yield 83.7 basis points over equivalent German government debt.
And in the high-yield market, Yioula Glassworks, a Greek manufacturer of glass containers and tableware, was poised to sell a 130 million euro ($152.6 million) high-yield bond, which it plans to use to repay debt and finance capital expenditure.
On Wednesday a banker familiar with the deal said the 10-year bond would be priced to yield 8.75 to 9 percent.