Computer Associates Taps Bank Credit Line

Computer Associates International Inc., which was forced to cancel a $1-billion debt sale, said Thursday that it has tapped a bank credit line as its short-term financing costs soared.

The company, whose shares have plunged 45% this month, has borrowed $1.4 billion of $3 billion in credit lines arranged by Credit Suisse First Boston, said Ira Zar, Computer Associates’ chief financial officer. The money was used to pay back other debt, Zar said.

Computer Associates is the third company in the Standard & Poor’s 500 Index to turn to bank financing as investor concerns that businesses’ accounting practices have overstated profit. Tyco International Ltd. and Qwest Communications International Inc. stopped selling commercial paper as investors demanded higher yields and shorter terms.

The FBI and the Securities and Exchange Commission are investigating how Computer Associates recorded sales of software and maintenance fees, Newsday and the New York Times reported.

The software maker’s shares fell $2.01, or 9.6%, to $18.90 on the New York Stock Exchange.

The Islandia, N.Y.-based company canceled its bond sale after Moody’s Investors Service said it was considering lowering the firm’s credit rating. Moody’s review crimped the company’s short-term financing because fewer investors can buy commercial paper from a company that may be downgraded soon.

Computer Associates said it hasn’t drawn on its credit lines to pay down its commercial paper obligations.