Hewlett-Packard obtains $8 billion loan commitment

NEW YORK (Reuters) - Hewlett-Packard Co(HPQ.N) has obtained an $8 billion financing commitment with a Deutsche Bank-led group of banks to help finance its acquisition of Electronic Data Systems, bankers close to the deal told Reuters Loan Pricing Corp on Wednesday.

Part of the $8 billion loan is expected to be a bridge loan that would be taken out in the bond market, with the balance made up of the combined company's long-term credit lines backing its commercial paper borrowings.

Hewlett-Packard announced the $13.9 billion acquisition of technology outsourcing company EDS last month.

Contrary to earlier expectations, pricing on the loan will not be linked to either Hewlett-Packard's credit default swaps or a CDS index, a banker said. This would have allowed pricing on the loan to increase substantially if the company decided to draw on its credit lines.

CDS spreads usually widen out if a company taps its credit lines. Such drawings are seldom welcomed by banks, especially now, since their balance sheets are constrained. Bankers close to the deal noted that Hewlett-Packard is not using CDS-based pricing, as it is unlikely to draw on its loan due to its high rating and easy access to other capital markets.

A Hewlett-Packard spokesperson declined to comment.

Recently, top-tier investment-grade companies such as American International Group(AIG.N), Wal-Mart Stores(WMT.N) and AT&T(T.N) used the relative value pricing mechanism by linking the pricing on their loans to either their own CDS or to a CDS index.

Hewlett-Packard did not obtain a financing commitment prior to launching the bid for EDS. Sources note that is a testament to the company's strong credit profile and the strong relationship it enjoys with banks.

Hewlett-Packard has relied heavily in the past on Citigroup and J.P. Morgan to arrange its financings.

Citigroup acted as underwriter in connection with about $4 billion of debt financings for Hewlett-Packard in 2007. Citigroup also acted as joint lead arranger, along with J.P. Morgan, on Hewlett-Packard's existing $3 billion 364-day revolver arranged in February.

Hewlett-Packard has a senior unsecured rating of "A2/A" and a commercial paper rating of "P1/A1."

Hewlett-Packard's last major purchase was the $19 billion acquisition of Compaq in 2001. Hewlett-Packard used part of its $4 billion credit facility, via J.P. Morgan and Citigroup, to help finance that acquisition.

(Reporting by Smita Madhur and Faris Khan; editing by Dena Aubin)