Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On June 23, 2009, Baker Hughes Incorporated (the "Company") entered into an interest rate swap transaction whereby the Company swapped a notional amount of its $250 million of fixed rate debt at 6.50% into floating interest rate debt through November 15, 2013. Under the terms of the swap, the Company will
(i) receive on the $250 million notional amount a 6.50% interest payment semi-annually on each May 15 and November 15, commencing November 15, 2009 through and including November 15, 2013; and (ii) pay on the $250 million notional amount a one-month LIBOR plus approximately 3.67% interest payment, payable monthly commencing on July 15, 2009 through and including November 15, 2013. On June 24, 2009, the Company entered into a second interest rate swap transaction whereby the Company swapped a notional amount of its $250 million of fixed rate debt at 6.50% into floating interest rate debt through November 15, 2013. Under the terms of the swap, the Company will (i) receive on the $250 million notional amount a 6.50% interest payment semi-annually on each May 15 and November 15, commencing November 15, 2009 through and including November 15, 2013; and (ii) pay on the $250 million notional amount a three-month LIBOR plus approximately 3.54% interest payment, payable quarterly commencing on August 15, 2009 through and including November 15, 2013. The economic impact of the two swap transactions is to convert the fixed interest rate on $500 million of the Company's 6.5% Senior Notes maturing on November 15, 2013 (the "Notes") to an effective variable interest rate based on
(i) a one-month LIBOR plus a 3.67% interest payment and (ii) a three-month LIBOR plus 3.54% interest payment, respectively. The counterparties are primarily the lenders in our credit facilities. Notwithstanding the terms of the swap transactions, the Company remains obligated for all amounts due and payable under the Notes pursuant to their terms.

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