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May 12, 2009

Microsoft floats $3.75 billion in bonds

Posted by David Hunter at 11:08 AM ET.

Yesterday for the first time in their corporate history Microsoft sold bonds, $3.75 billion worth:

Microsoft Corp., the world’s largest software maker, sold $3.75 billion of debt in its first bond offering, taking advantage of its top credit ratings to help fund a share buyback and technology investments.

The sale was split among $2 billion of 2.95 percent, 5-year notes, $1 billion of 4.2 percent, 10-year debt, and $750 million of 5.2 percent, 30-year bonds, said a person familiar with the offering who declined to be identified.

Microsoft, whose shares have declined 34 percent in the past year, is seizing on a credit-market rally to help fund a $40 billion stock repurchase program. The company, which for years resisted shareholder demands to add debt, is also investing in data centers to compete against Google Inc. in Internet search.

The Redmond, Washington-based software maker became the first company in a decade to receive the top AAA rating from Standard & Poor’s when it initially filed in September to tap debt markets. Moody’s Investors Service also assigned its highest rating to Microsoft’s debt.

In September, Microsoft’s board authorized debt financing of up to $6 billion and Microsoft had already established a $2 billion commercial paper program for short term cash flow purposes.

Microsoft has $25 billion in cash sitting in their piggy bank, so there is speculation that they may also have some big expenditure planned for the near future over and above the share buyback and capital expenditures. Cash management is an arcane art, but presumably getting low interest rates now was deemed prudent as opposed to paying higher rates later when they expect to really need more cash.

Filed under Financial, General Business, Microsoft

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