US corporate bond spreads ended mixed on Friday as an increased amount of event risk in the market left investors jittery. "Investors definitely have to sweat the details as much as ever because idiosyncratic risk is definitely picking up," said Brian Arsenault, high-yield strategist at Morgan Stanley.
An increased occurrence of stock buybacks, corporate break-ups, and leveraged buyouts spook corporate bond investors, especially when they are unexpected.
Privately held Koch Industries Inc said earlier this week it will acquire paper product maker Georgia-Pacific Corp, and while the financial details of the deal have yet to be revealed, GP has launched a $2.4 billion debt buyback.
The lack of details leaves market participants wondering if the company will be levered up in the transaction.
"Georgia-Pacific was a very stable 'BB' issuer that many thought was migrating its way back to investment grade," Arsenault said.
GP debt was among the most actively traded in the high-yield market and its bonds ended mixed on Friday.
GP's 8.125 percent note due 2011 ended up a little more than a cent on the day, to 100 cents on the dollar, according to MarketAxess. However, the company's 9.5 percent note due 2011 ended down a half cent on the day at 106 cents on the dollar.
In the high-grade market, spreads on GE Insurance Solutions Corp, the reinsurance unit of General Electric Co, narrowed on GE's plan to sell the unit to Swiss Reinsurance Co.
Standard & Poor's warned it may cut Swiss Re's debt ratings, while it may raise its ratings on GE Insurance Solutions. Moody's Investors Services and Fitch Ratings may also cut Swiss Re on the acquisition.
Spreads on GE Insurance Solutions' 7 percent bond due 2026 narrowed 73 basis points, to 141 basis points over Treasuries, according to MarketAxess.
In the new issue market, Ameriprise Financial Inc sold $1.5 billion of debt in a two-part note deal on Friday. The financial services company was recently spun off from American Express Financial Advisors.
"Part of the proceeds from debt issued under the shelf will be used to refinance $1.35 billion in debt, while the remainder will be used for general corporate purposes," S&P analysts wrote in a release about the sale.
Nearly $13.4 billion in debt has been absorbed by the investment grade market this week as issuers bring deals to market before the holiday season slowdown.