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Ackman Stains P&G Credit

Swaps move higher on fears activist investor will favor shareholders over bondholders.

By Charles Mead, Bloomberg | Updated on July 20, 2012

Traders are pushing derivatives linked to Procter & Gamble Co. debt to the riskiest level relative to Colgate-Palmolive Co. and lower-rated Unilever since 2009 on concern that investor Bill Ackman will pressure the company to reward shareholders at lenders’ expense.

The cost to protect bonds of the world’s largest consumer-goods maker from default has increased 10.2 basis points to 0.62 percentage point yesterday in New York since July 11, after Ackman bought a $1.8 billion stake in P&G. While the stock has since gained 5.6 percent as bullish options wagers surge, bonds of the maker of Tide, Pampers and Crest are underperforming as profit margins narrow and sales growth decelerates to the slowest since 2009.

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