Nov. 13 (Bloomberg) -- EMC Corp., the world's biggest maker of computers for business records, plans to sell $3 billion in convertible notes to refinance its acquisition of RSA Security Inc. and buy back stock.

The offer, the company's first-ever bond sale, will include $1.5 billion of convertible senior notes maturing in 2011 and $1.5 billion of similar debt maturing in 2013, Hopkinton, Massachusetts-based EMC said today in a statement.

Technology companies, including Cisco Systems Inc. and Amgen Inc., this year have taken advantage of the appetite for debt securities to borrow money at lower rates to make acquisitions and boost share prices. San Jose, California-based Cisco borrowed $3 billion in five-year notes and Thousand Oaks, California-based Amgen sold $5 billion in convertible bonds, both in February.

``After the Cisco deal, a lot of people asked why wouldn't some of these large-cap tech names like EMC do it,'' said Aaron Rakers, an analyst who covers EMC for St. Louis-based A.G. Edwards Inc. ``On balance, it's a positive. They didn't have any debt before.''

The notes will be convertible to EMC shares at a price about 50 percent above the stock price on the issuance date, EMC said in its statement. Underwriters will have the option to sell another $450 million for EMC, whose credit rating was raised this year by Standard & Poor's to BBB+, the third-lowest investment grade.

Shares Down

Shares of EMC fell 9 cents to $12.61 today in composite trading on the New York Stock Exchange. The shares have declined 7.4 percent this year. Rakers said EMC has already bought back 7 percent of its shares this year and may purchase another 5 percent of the stock if it sells all $450 million of the optional amount, known as a greenshoe.

Convertible bonds are debt that can be exchanged for a company's shares if the stock price reaches a certain level.

EMC's notes, like Amgen's, may be contingent convertibles, or so-called CoCos, which can be swapped for stock only after the shares pass a threshold above the conversion price and stay there for a set length of time. Usually, the stock has to rise 10 percent to 30 percent higher than the conversion price and stay there for at least 20 days before investors can exchange the bonds.

The convertibles will be issued simultaneously with a hedge transaction also funded by the notes, EMC said. The hedge consists of an option EMC would buy to cover its obligation to issue shares and selling a call option at about the same price at which the debt can be converted to common stock. The method helps keep stock prices from falling after a convertible offering.

Sales Up

The new method has helped push sales of convertible notes by U.S. companies to $47.7 billion so far this year, compared with $39.9 billion for all of 2005, according to data compiled by Bloomberg.

Convertible bonds are up 10.7 percent this year, outperforming both the 4.25 percent return of the investment grade and 9.7 percent from the high-risk high-yield indexes, according to Merrill Lynch & Co. index data. Convertibles lost 0.3 percent in 2005.

Amgen sold its debt in two $2.5 billion parts, one at 0.125 percent due in 2011 and the other paying 0.375 percent over six years. Cisco, whose debt doesn't convert to stock, paid 5.5 percent on 10-year debt and 5.25 percent on five-year notes.

The EMC sale will be used to repay $2.2 billion the company borrowed from a credit facility to finance the purchase of Bedford, Massachusetts-based RSA, which was announced in June. About $850 million of the remainder, plus cash on hand, will be used to buy back stock and to cover convertible note hedge transactions.

To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net; Ron Day in New York at rday1@bloomberg.net;

Last Updated: November 13, 2006 17:08 EST