Computer Associates Cancels $1 Billion Bond Sale

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Computer Associates International, the world's No. 4 software maker, has canceled its $1 billion bond sale, an official for co-lead manager Salomon Smith Barney said Thursday.

The cancellation comes two days after Moody's Investors Service warned it may downgrade the Islandia, N.Y.-based company's credit ratings. This helped trigger a nearly 14 percent decline in Computer Associates shares on Wednesday.

Computer Associates planned to use proceeds to refinance short-term debt at interest rates it considered favorable.

Moody's late Tuesday said it may cut Computer Associates' "Baa1" senior unsecured debt and "Prime-2" short-term debt ratings, both medium investment grades, amid concern over the company's business risks. Computer Associates said on Wednesday it was "surprised and disappointed" with Moody's decision, and announced plans to delay "closing" the bond sale until Friday.

Terms of the sale were announced on Friday. Computer Associates had planned to sell $400 million of five-year notes yielding 7.566 percent and $600 million of 10-year notes yielding 8.487 percent. Had Computer Associates completed the sale, it might have had to offer higher yields.

Banc of America Securities was also arranging the sale. Computer Associates shares traded early Thursday at $28.25, up $1.13.

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