Pactiv credit-swaps fall after report of possible bid from Koch

The cost to protect Pactiv Corp. bonds against losses fell after a report that Koch Industries Inc. is in talks to buy the maker of Hefty trash bags. Pactiv shares rose to the highest since October 2007.

Credit-default swaps on Pactiv debt dropped 30 basis points to 250 basis points, according to broker Phoenix Partners Group. The New York Post reported Koch may make a bid for the Lake Forest-based company early next month, citing unidentified people close to the matter.

Pactiv credit swaps soared 162 basis points to 300 basis points on May 17 after reports that it was in talks to be bought by Apollo Global Management LLC, the private-equity firm founded by Leon Black. Credit swaps on targets of private-equity purchases typically rise because the firms historically have borrowed two-thirds or more of the acquisition prices.

Pactiv rose $1.44, or 4.9 percent, to $31.09 at 9:51 a.m. in New York Stock Exchange composite trading, the biggest gain since June 8. The shares gained 23 percent this year through yesterday.

Koch didn't immediately respond to calls seeking comment, and Pactiv declined to comment.

Swaps pay the buyer face value in exchange for the underlying security if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point, 0.01 percentage point, equals $1,000 annually on a contract protecting $10 million of debt.