New York: Companies in the US are spending the highest portion of bond-sale proceeds in more than a decade for acquisitions and expansions, joining Warren Buffett's "all-in wager" on a recovery and taking advantage of the lowest borrowing costs since 2004.

Kraft Foods Incorporated, the maker of Oreo cookies, raised $9.5 billion (Dh34.8 billion) on Saturday for its takeover of Cadbury Plc, while Buffett's Berkshire Hathaway Incorporated sold $8 billion of notes for its buyout of railroad company Burlington Northern Santa Fe Corporation, which he called an "all-in wager" on the US economy.

About 70 per cent of debt issued this year by non-financial companies is financing mergers and acquisitions or related business investments, the most of any five-week period since 1998, according to data compiled by Bloomberg. Companies boosted inventories last quarter as the US expanded at the fastest pace in six years, government reports showed.

"It's the resumption of business sales growth that has improved the backdrop for M&A," said John Lonski, chief economist at Moody's Capital Markets Group. "Financing costs are relatively cheap if you can access credit."

The extra yield investors demand to own corporate bonds rather than government debt ended Friday at 166 basis points, up from 164 basis points a day earlier, according to Bank of America Merrill Lynch's Global Broad Market Corporate Index. Overall yields fell to an average 4.07 per cent, from 4.12 per cent on Thursday.

Default Protection

Elsewhere in credit markets, the cost to protect company debt in North America and Europe from default jumped to an almost nine-week high as concern rose that governments will fail to close budget deficits.

Lloyds Banking Group Plc's $3.3 billion of mortgage-backed bonds issued last week declined in secondary market trading, and firms including BlueMountain Capital Management LLC say they are liquidating funds raised during the recession to buy debt at depressed prices because they see gains moderating.

"We've captured most of the big opportunity," BlueMountain co-founder Stephen Siderow, 42, said. "It isn't going to happen again any time soon and that's why we urged our clients to move on." They're reinvesting in other credit funds of the $4 billion money manager that aren't dependent on markets rising, he said.

Borrowers raised $27.8 billion this year for acquisitions, capital expenditures and project financing, 70 per cent of the $39.6 billion in non-financial investment-grade debt sold, compared with an average of 23 per cent in all of 2009, Bloomberg data show. Last year's peak was 36 per cent in March, when new York-based Pfizer Incorporated sold $13.5 billion of bonds to finance its takeover of Wyeth.

Northfield, Illinois-based Kraft, the world's second-largest food company, boosted the size of its offering from $4 billion as demand increased, making it the biggest bond issue in almost a year, to finance the cash portion of its takeover of Cadbury. It sold $1 billion of 3.25-year notes, $1.75 billion of 6-year debt, $3.75 billion of 10-year bonds and $3 billion of 30-year debt. The biggest portion was priced to yield 205 basis points more than Treasuries.

Berkshire Hathaway raised $8 billion of notes for its Burlington Northern purchase. The sale included $2 billion of one-year floating rate debt that pays two basis points less than the three-month London interbank offered rate, according to data.

Buffett is using the debt, equity and Berkshire's cash to finance the biggest purchase of his four-decades as chief executive officer. The 79-year-old billionaire offered $26 billion for the 77.4 per cent of Fort Worth, Texas-based Burlington Northern that Berkshire doesn't already own.