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.
Demand also has been strong for investment-grade corporate bonds. General Electric Co. on Thursday sold $5 billion of 10-year notes at a yield of 5.05%, and Santa Barbara-based Tenet Healthcare sold $1 billion of 10-year notes yielding 7.68%.