Less than three months ago, ratings agency Moody’s Corporation (NYSE:MCO) downgraded its long-term credit rating (following a similar move by Fitch) on HP’s senior unsecured paper to Baa1 along with a negative outlook over concerns that its core businesses will have “slow to no growth prospects over the coming years.” Free cash flow was expected to take a hit due to restructuring-related cash outflows.
On top of that, HP has several hefty debt maturities on the horizon this year.
|Amount Due||Issued||Interest Rate||Month Due|
|$1.5 billion||March 2008||4.5%||March 2013|
|$1.75 billion||May 2011||3-month LIBOR + 0.28%||May 2013|
|$1.1 billion||June 2003||6%||August 2013|
|$1.1 billion||September 2010||1.25%||September 2013|
That’s $5.45 billion that HP is on the hook for over the next seven months. When you add in its capital lease obligations, that figure climbs to $5.7 billion. At the end of October, HP was sitting on $11.3 billion in cash and equivalents, so these debt payments could put a dent in its coffers. More than likely, though, HP will refinance a good portion of this paper, so it won’t be as painful as investors might expect.
Still, HP’s debt load has steadily climbed over the years and its debt-to-equity ratio is the highest it’s ever been.
I’m not so sure that HP is in a position to tease rivals about their financial positions. OK, let’s be frank: it’s not.
The article HP Teases Dell About Its New Private Life originally appeared on Fool.com and is written by Evan Niu, CFA.
Fool contributor Evan Niu, CFA, has no position in any stocks mentioned. The Motley Fool recommends Moody’s.
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