Fitch affirms Hewlett Packard

Fitch Ratings said it affirmed Hewlett-Packard Co.'s A+ long-term issuer default rating following its proposed acquisition of Electronic Data Systems Corp. (rated BBB on Rating Watch positive) in an all-cash deal valued at $25 per share, or $13.9 billion on an enterprise value basis.

The agency also affirmed the issuer's A+ senior unsecured debt and credit facility ratings and F1 commercial paper rating.

The outlook is stable.

Fitch said it expects the most of the purchase price to be debt-financed.

The company's proposed acquisition is expected to expand the scale, geographic diversity and breadth of service line offerings, Fitch said.

Ratings are supported by Fitch's expectations that the company's credit protection measures will gradually improve in 12 to 18 months, after initially weakening, due to debt reduction and profitability improvements from considerable cost reductions, according to the agency.

Total debt-to-EBITDA ratio is expected to be below 1.75 times, compared with 0.6 times now.

Ratings also reflect strong financial flexibility and liquidity provided by a significant cash position and robust free cash flow, Fitch said, as well as significant and increasing recurring revenue from outsourcing services, printer supplies, technology services and software maintenance.

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