S&P Affirms Ratings on Hewlett Packard Enterprise (HPE) Amid ES Business Spin-off Plans (CSC)

S&P Global Ratings said it affirmed its 'BBB' corporate credit rating on Hewlett Packard Enterprise Co. (NYSE: HPE). The outlook is stable.

At the same time, we affirmed our 'BBB' issue-level rating on the company's senior unsecured notes and 'A-2' short term rating for commercial paper.

"The rating affirmation follows our assessment of HPE's plans to sell its ES business to CSC, which we regard as credit enhancing for HPE," said S&P Global Ratings credit analyst John Moore.

Following the ES divestiture, we expect HPE's free cash flow will improve in 2017, as HPE should eliminate sizeable capital expenditures on ES and a portion of ES restructuring costs it otherwise would have incurred. The divestiture should also enable HPE to strengthen its operating performance through partnership expansion with a broad roster of technology service providers worldwide, including a number of international consultancies and outsourcing service providers.

The stable outlook reflects our expectation that HPE will maintain moderate financial policies, significant cash balances, and a minimal financial risk profile, providing important support for the rating as the company migrates from legacy solutions to revive revenue growth. We expect HPE will maintain leverage below 1.5x, be able to meet its shareholder return initiatives, and pursue accretive acquisitions.

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