HP Said to Sell $14.6 Billion in Bonds to Back Company Split

  • Note sale comes day after bond issuance came to a halt
  • Securities will facilitate separation of Hewlett-Packard

Hewlett-Packard Co. raised $14.6 billion in the bond market to facilitate its split into two companies in the corporate bond market’s first major offering this week.

Hewlett Packard Enterprise, which will supply businesses with high-end technology once it’s separated from the printer and PC segment later this year, issued the notes in as many as nine parts, according to a person with knowledge of the offering. The deal comes after issuance of company debt came to a halt Tuesday, capping off the worst September for global sales in four years.

The securities, which were raised at yields that were higher than those on Hewlett-Packard’s existing bonds, bring the technology company another step closer to a split-up that management has said will allow each segment to be more nimble and specialized. The enterprise unit will funnel cash raised in the offering to HP Co., which will then use the money to redeem as much as $8.85 billion in debt and refinance other obligations, the company said Wednesday in a regulatory filing.

"The enterprise bonds are coming substantially behind the current HPQ bonds," showing the company is offering concessions to get the deal done and highlighting the diverging credit profiles of the emerging entities’, said Erin Lyons, an analyst with CreditSights Inc.

The company’s enterprise services business has lost about $4 billion in annual revenue since 2011. Standard & Poor’s gave it a BBB rating Sept. 23, two levels above junk, citing "revenue declines in legacy hardware and services markets" and the "significant capital expenditures" required by its IT outsourcing services businesses, as among factors in the rating choice.

Kait Conetta,, a spokeswoman for Hewlett-Packard,  declined to comment on the sale beyond information provided in the company’s press releases and presentations.

The longest part of the deal was a 30-year bond that yields as much as 3.5 percentage points more than similar-maturity Treasuries, said the person, who asked not to be identified because the information isn’t public. That’s 0.41 percentage point more than the average yield paid Tuesday on Hewlett-Packard’s existing bonds of the same maturity, according to data compiled by Bloomberg.

HP Inc., which will sell printers and PCs, will have $2.3 billion in net debt once the split is complete, according to a Sept. 15. company presentation.

The sale and refinancing should provide soon-to-be HP Inc. "a clear runway in terms of maturity profile to weather the downturn in the PC cycle," but the split leaves existing bondholders "with pure exposure to the more volatile PC and printer business," Lyons said.

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