Potential Xerox Bid For HP Weighs Down Bond Prices
06 November 2019 - 7:38PM
Dow Jones News
By Matt Wirz
Xerox Holdings Corp.'s potential takeover of HP Inc. provided a
lift to shareholders of both companies Wednesday. For bondholders,
not so much.
The planned cash-and-stock offer from Xerox could be funded in
part by borrowing more debt. That prospect sent bond prices for
both the potential target and acquirer tumbling.
HP's $1.2 billion bond due 2041 fell about 7.5% to 105 cents on
the dollar following a report in The Wall Street Journal about the
possible acquisition. HP currently has a triple-B investment-grade
credit rating, but Xerox has a double-B credit rating, which places
it on the highest rung of the junk-debt category.
Xerox's bond due 2039 fell to about 99 cents on the dollar from
104 cents on Tuesday, according to data from MarketAxess. The bonds
had risen Tuesday after the company's announcement that it would
sell a 25% stake in its joint venture with Fujifilm Holdings Corp.
for $2.3 billion.
HP stock jumped about 11% Wednesday morning, while Xerox rose
about 1%.
Printer manufacturer Xerox is part-owned by activist investor
Carl Icahn, and the company has been cutting costs this year while
pursuing a large acquisition. The market value of HP, which
principally makes personal computers, had dropped about 10% this
year before the Journal's report.
Xerox will have about $2.7 billion of cash on hand and $4.3
billion of debt at the end of the year, after accounting for the
Fujifilm stake sale and a bond payment coming due in December,
according to research firm CreditSights. HP has a market value of
$27 billion.
U.S. government bond yields slid lower Wednesday, retracing part
of the selloff earlier in the week when detente in the U.S.-China
trade war prompted risk-on trading. The yield on the benchmark
10-year Treasury note recently traded at 1.823%, according to
Tradeweb, down from 1.865% Tuesday. Yields fall as bond prices
rise.
The WSJ Dollar Index, which measures the U.S. currency against a
basket of 16 others, dropped slightly to 90.79 Wednesday from 90.80
Tuesday after a two-day rally.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
November 06, 2019 13:23 ET (18:23 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
HP (NYSE:HPQ)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
HP (NYSE:HPQ)
Historical Stock Chart
Von Jul 2023 bis Jul 2024