June 28 (Bloomberg) -- Kia Motors Corp., South Korea's second-largest automaker, canceled a $500 million bond sale for this week as skittish investors cut demand for riskier assets.

At least seven companies from U.S. Foodservice in Columbia, Maryland, to steelmaker Arcelor Mittal in Rotterdam, Netherlands, pulled at least $2.2 billion of debt sales amid concern that losses from bonds backed by U.S. subprime mortgages will spread to other markets. Caliber Global Investment Ltd., a $908 million hedge fund, said today it will close after losses.

``This may mark a tipping point in the credit cycle,'' said Robert Appleby, who helps manage $2 billion at ADM Capital in Hong Kong. ``If we see a shakeout, it will be a healthy one because it will prevent deals from being priced incorrectly.''

Bankers postponed $100 million of bonds from Banco Schahin SA in Sao Paulo, $200 million of notes from Catalyst Paper Corp. in Vancouver, and $750 million of bonds for MISC Bhd., the world's biggest owner of liquefied natural gas tankers, in Kuala Lumpur. Dollar General Corp., the U.S. retailer being bought by Kohlberg Kravis Roberts & Co., sold $1.9 billion of notes today after restoring to the deal $725 million of riskier securities it had cut earlier in the day.

Kia, an affiliate of Hyundai Motor Co., South Korea's biggest automaker, was selling the bonds in Singapore, Hong Kong and London this week before canceling. Credit Suisse Group, JPMorgan Chase & Co., UBS AG and Korea Development Bank were organizing the sale, which would have helped finance the construction of a factory in Georgia in the U.S. and repaid existing debt.

Sale Delay

``We decided to delay the debt sale like the other bond issuers,'' said Lee Hwa Woun, a Seoul-based spokesman at Kia, whose bonds have the lowest investment-grade credit ratings of Baa3 from Moody's Investors Service and BBB- from Standard & Poor's. Bonds ranked lower are known as speculative grade, or junk.

Defaults on subprime home loans triggered the near-collapse earlier this month of two hedge funds managed by the asset management unit of New York-based Bear Stearns Cos. The firm, the biggest U.S. broker to hedge funds, said on June 26 it won't provide financing to one of the funds after offering a $1.6 billion bailout for the other.

Buyout firm Carlyle Group in Washington today cut the size of its initial public offering for a fund that invests in bonds backed by mortgages by 25 percent to $300 million.

U.S. Foodservice postponed a $650 million sale of notes on June 26 to finance its acquisition by KKR and Clayton Dubilier & Rice Inc.

Bond Risk Jumps

The perceived risk of owning U.S. corporate bonds rose for the fourth day this week, according to credit-default swap traders who bet on creditworthiness. Contracts based on $10 million of debt included in the CDX North America Crossover Index increased $2,415 to $184,980 today, close to a 10-month high of $192,000, according to CMA Datavision in London.

Credit-default swaps are financial instruments based on bonds or loans that are used to speculate on a company's ability to repay debt. The contracts, conceived to protect bondholders, pay the buyer face value in exchange for the underlying securities or the cash equivalent in a default.

Merrill Lynch & Co. Chief Executive Officer Stanley O'Neal yesterday said at a conference in London that he saw few risks from the U.S. subprime mortgage slump spilling over to other parts of the global debt market.

M&A Slowing

Carphone Warehouse Group Plc, Europe's largest mobile-phone retailer, is pressing ahead with its first sale of bonds ``early next week,'' Barclays Capital syndicate banker Wayne Hiley said in an interview today. Hang Seng Bank Ltd., Hong Kong's second- largest by assets, raised $300 million today selling 10-year bonds. Procter & Gamble Co., the largest U.S. consumer-products maker, sold $1.75 billion of notes yesterday.

Prices of some bonds sold last week dropped. The yield on $500 million of 7.875 percent 10-year bonds issued June 20 by Hynix Semiconductor Inc., the world's second-largest memory chipmaker, based in Ichon, South Korea, increased to 2.83 percentage points more than similar-maturity U.S. Treasuries today from 2.76 percentage points.

Kia, based in Seoul, planned to price its securities to yield about 0.9 percentage point more than the benchmark mid- swap rate, according to an e-mail sent to investors earlier this week.

Mergers and acquisitions are increasing at the slowest pace since January. Companies announced about $304 billion of takeovers this month, half the amount in April or May. Leveraged buyouts, where firms use mostly borrowed money to fund acquisitions, account for 21 percent of this year's mergers.

``For so long, investors have been making excuses to buy,'' said Appleby at ADM. ``Now they are looking for reasons not to buy. Psychology does change on a dime.''

To contact the reporter for this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.

Last Updated: June 28, 2007 18:29 EDT