Electrolux seen as next buyout target

LONDON: Bondholders are growing concerned that Electrolux AB, the world’s second-biggest maker of household appliances, may be a takeover target, according to traders betting on the creditworthiness of companies through credit-default swaps.

The perceived risk of owning Electrolux’s 4.4bn Swedish kronor ($601m) of bonds rose as much as 14% on Tuesday after the biggest increase in the company’s shares in two months. Credit-default swaps are financial instruments based on corporate bonds and loans that are used to speculate on an increase or decrease in indebtedness.

“There’s been speculation there may be a takeover on the back of interest in that region from activist funds,” said Victoria Whitehead, a credit analyst at ABN Amro Holding NV in London. The credit-default swaps “are reacting to the volatility in the share price,” she said.

Electrolux bondholders are concerned that an acquisition would add debt and lead to lower credit ratings. Electrolux’s credit-default swaps rose to e37,000, from e32,900 on September 11, according to Bloomberg data. A gain indicates deterioration in the perception of credit quality; a decline suggests an improvement.