(Updates with bond investor comment, stock price, background on tax incentive)

 
   DOW JONES NEWSWIRES

ConAgra Foods Inc. (CAG) boosted its debt-repurchase tender offer by $300 million amid strong demand Monday from investors in the wake of the consumer-foods company raising $1 billion to repay other debt.

The sale itself was increased from $750 million two weeks ago.

Holders tendered $290.6 million of so-called put notes as of Friday's deadline to receive an extra payment; there are $300 million of the notes outstanding.

Meanwhile, $679.4 million of senior notes due in 2010 and 2011 were tendered as of Friday; ConAgra originally offered to buy up to $300 million of them. Monday's announcement doubles that figure. The company is offering the holders a premium above the notes' par value.

Buying the put notes allows the company to remove a liability and preempt any wave of puts, said William Larkin, portfolio manager at Cabot Money Management, based in Salem, Mass. In addition, the company may be looking to retire its expensive debt. The notes maturing in 2010 carry a coupon of 7.875%, but its recently issued 10-year notes trade with a coupon in the 6% range, Larkin said.

"The market is a little more freed up," he said.

ConAgra has been hurt by hedging costs as commodity prices plunged from their July peak. The company has cut back on capital spending in an effort to preserve cash. S&P cut its credit rating on ConAgra earlier this month to two steps above junk territory, saying the company's financial condition isn't likely to improve much amid the economic downturn.

Last month, the company reported a fiscal third-quarter profit that exceeded analysts' projections, but packaged-food shipments fell and the company lowered prices on some products in the face of private-label competition.

Shares were recently down 32 cents at $17.95.

More companies may be looking to buy back their debt. Debt forgiven through buybacks is usually taxed as income, but stimulus legislation allows companies that repurchase debt to delay those taxes until 2014, and then to spread the tax out over a five-year period.

-By Katherine E. Wegert, Dow Jones Newswires; 201-938-5294; katherine.wegert@dowjones.com

(Romy Varghese and Michael Aneiro contributed to this report.)