• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Announcement:

Moody's places long term (A3 senior unsecured) ratings of Hewlett-Packard under review for downgrade

Global Credit Research - 04 Oct 2012

Approximately $31 billion of debt securities affected

New York, October 04, 2012 -- Moody's Investors Service placed the long term ratings of Hewlett-Packard (HP) under review for downgrade -- senior unsecured of A3 -- following management's revised expectations for profitability and cash flow, and the extended timetable for the potential for improvement in business performance. This leads to the likelihood of leverage being higher than we expected over the intermediate term. The P-2 short term rating is not under review.

RATINGS RATIONALE

The review will focus on the company's prospects to stabilize and then improve profitability and cash flow generation of its broad portfolio and to achieve meaningful cost reductions without disrupting its business execution. Additionally, in considering the reduced cash flow expectations, Moody's will assess management's flexibility and commitment to reduce gross debt, while also reinvesting in its business to improve its competitive profile.

Moody's will also review management's strategy to better focus its broad product portfolio and to improve the consistency of its business execution in the face of a potentially more challenging macro environment, as well as an aggressive competitive landscape.

We expected the company to generate $6 billion to $7 billion of free cash flow (cash from operations less capex less dividends), which compares to management's revised expectations of about $4 billion over the next fiscal year.

The company maintains a good liquidity profile, with cash and short-term investments of $9.5 billion as of July 2012. HP's commercial paper usage has been modest over the last few quarters, with $574 million outstanding at July 2012. The company maintains solid alternate liquidity in the form of a $3.0 billion bank facility maturing March 2017 and a $4.5 billion bank facility maturing February 2015.

Ratings placed under review for downgrade:

A3 senior unsecured rating; shelf ratings senior unsecured ((P)A3, subordinated (P)Baa1, preferred stock (P)Baa2

For further information, please see www.moodys.com

Hewlett-Packard, headquartered in Palo Alto, California, with $122 billion in revenue for the twelve months ended July 2012, is the world's largest technology firm that designs, manufactures, and services computing and imaging systems and provides information technology and consulting services.

The principal methodology used in rating Hewlett-Packard was the Global Technology Hardware Industry Methodology published in September 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Richard J. Lane
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Jankowitz
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's places long term (A3 senior unsecured) ratings of Hewlett-Packard under review for downgrade
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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