Moody's may cut Hewlett-Packard ratings
NEW YORK, May 2 (Reuters) - Moody's Investors Service said on Thursday it may cut Hewlett-Packard Co.'s (NYSE:HWP - news) credit ratings, one day after a Delaware court certified the computer and printer maker's shareholder vote approving the purchase of Compaq Computer Corp. (NYSE:CPQ - news).
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Moody's said it may cut Hewlett-Packard's "A2" senior unsecured debt rating, its sixth highest investment grade out of 10, and "Prime-1" short-term debt rating, its highest investment grade. It repeated that it may raise Compaq's "Baa2" senior unsecured and "Prime-2" short-term ratings, its second lowest investment grades. Moody's action affects $6.4 billion in debt.
"The review will focus on operating performance and (the) outlook of the merged businesses, along with the integration plans and the execution risks surrounding the merger, which Moody's expects will be significant," the rating agency said.
Downgrades ordinarily raise borrowing costs. Moody's said Hewlett-Packard and Compaq should end up with equivalent ratings to the extent Hewlett-Packard guarantees Compaq debt. If it does not, there would likely be a one-notch differential in the long-term ratings.
On March 7, Standard & Poor's cut Hewlett-Packard's long- and short-term ratings to "A-minus" and "A-2," respectively, one notch below Moody's current ratings. |
