Investors' hunger for high-yield corporate bonds allowed paper and lumber giant Georgia-Pacific Corp. to sell $1.5 billion of the securities Thursday, the single biggest "junk" bond sale since May 2001.
The company had planned to sell $500 million of bonds but raised the total sharply because of strong demand. Even at $1.5 billion, the sale was "substantially oversubscribed," according to a person close to the deal. The proceeds will pay off bank debt.
The sale included seven-year notes yielding 9% and 10-year notes yielding 9.38%.
By contrast, investors opting for the safety of 10-year Treasury notes can earn 3.94% today.
Junk bond yields have plunged since late October as more investors have clamored to buy the non-investment-grade securities rather than settle for lower-risk, lower-yielding bonds.
The demand for junk issues reflects many investors' expectations that the economy will continue to recover this year, boosting companies' financial health, analysts say.