Bloomberg News

Hewlett-Packard Bonds Decline After $8.8 Billion Autonomy Charge

November 20, 2012

Bonds of Hewlett-Packard Co. (HPQ:US) fell after the world’s largest computer maker reported fourth-quarter results that included an $8.8 billion impairment charge linked to the 2011 acquisition of Autonomy Corp.

Hewlett-Packard’s $1.5 billion of 4.65 percent bonds maturing in December 2021 dropped as much as 3.1 cents to 94.9 cents on the dollar, the lowest since the bonds were issued last year, before trading at 96.2 cents to yield 5.18 percent at 8:56 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Its $1.2 billion of 6 percent securities due in 2041 dropped 2.9 cents to a record-low 92.7 cents.

The charge is linked to “serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy,” Palo Alto, California-based Hewlett-Packard said today in a statement that also forecast fiscal first-quarter profit that missed analysts’ estimates amid a continuing slump in personal computer sales.

Credit-default swaps protecting the debt of Hewlett-Packard surged 32.9 basis points to 378.5 basis points, the highest on record, as of 8:30 a.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The contracts, which typically rise as investor confidence deteriorates and fall as it improves, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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Companies Mentioned

  • HPQ
    (Hewlett-Packard Co)
    • $40.7 USD
    • 0.16
    • 0.39%
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