Creditors of Freescale Semiconductor Holdings are growing more confident the target of the largest semiconductor buyout will avoid default after its initial public offering gave bondholders a $4.4 billion equity cushion.

Credit-default swaps on the company, which two months ago priced in a 46 percent chance of default, now imply 35 percent, after the largest supplier of chips to the U.S. automotive industry sold $783 million of equity on May 25, according to data compiled by Bloomberg. Freescale's most active bonds trade above face value.

Freescale, taken private in 2006 by Blackstone Group LP, TPG Capital, Carlyle Group and Permira Advisers LLP for $17.6 billion, raised 25 percent less in its share offering than the maximum initially sought. Proceeds will be used to help chip away at $7.6 billion of outstanding debt at the Austin, Texas- based company, which now has a market value of $4.4 billion.