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S&P to raise Compaq rating

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CIOL Bureau
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NEW YORK: Standard & Poor's on Tuesday said it may cut Hewlett-Packard

Co.'s credit and debt ratings, and raise ratings of Compaq Computer Corp., after

Hewlett-Packard agreed to buy Compaq for $25 billion in stock to create a new

computing giant amid an industry slump.

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S&P said it may cut Palo Alto, California-based Hewlett-Packard's

"AA-minus" and "A-1-plus" senior unsecured and short-term

debt ratings, its fourth highest and highest. It said it may raise Houston-based

Compaq's comparable "BBB" and "A-2" ratings, respectively

its ninth and third highest. The rating actions also affect both companies'

finance arms.

The rating agency, which normally completes reviews within a few months, said

Hewlett-Packard's corporate credit rating is "likely to remain in the

'single-A' category." Its actions on Tuesday suggest no more than two-and

one-notch downgrades for Hewlett-Packard's long-and short-term ratings.

Downgrades usually raise borrowing costs.

S&P said its review for Hewlett-Packard "is based on the acquisition

of a lower-rated company with a similar-size revenue base" and

"concern about integration and business disruption risks." Both

companies, it said, face "difficult market conditions."

Earlier on Tuesday, rating agency Fitch said it may raise Compaq's

"BBB-plus" and "F2" long-and short-term ratings.

(C) Reuters Limited 2001.

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