J.P. Morgan and Citibank/ Salomon Smith Barney are doing early work on a new expanded commercial paper backstop for Hewlett-Packard Company, likely to emerge in the first quarter next year. Ken Frier, assistant treasurer for Hewlett-Packard, said, "We are raising a new backstop with Salomon and J.P. Morgan to replace the old five-year Salomon-led facility, maturing in April 2002." The old facility was $1 billion, he noted, but the new one will be larger for two reasons. "When we merge with Compaq, theirs will terminate," he said. "The new one will need to encompass the needs of both companies," he said. Furthermore, the backstop needs to support an expanded commercial paper program, regardless of the merger, he added. "Hewlett has been in a position with a $1 billion CP to support a larger backup program," Frier noted. He was unable to provide a figure for the planned backstop.
Compaq Computer has a $2.2 billion swingline revolving credit facility led by Chase Manhattan Bank. Bank of America, Citi and BANK ONE, are syndication agents according to Capital DATA Loanware. Chase also plays a lead role on the existing Hewlett facility.
The maturity is likely to be split between a five-year and 364-day facility, due to the expanded size of the deal. "If we were doing a $1 billion line it would be five-year, but the facility will be larger and the market is more receptive to 364-day components," he said. He declined comment on the choice of the banks, why J.P. Morgan was involved or potential pricing. J.P. Morgan and Citibank officials did not return calls.