Nov. 20 (Bloomberg) -- Microsoft Corp., the world’s largest software maker, may sell bonds for the first time, seeking to use its pristine credit rating to extract funds from a market roiled by default concerns.

The company is considering senior unsecured debt securities, according to a regulatory filing today with the U.S. Securities and Exchange Commission. The shelf registration clears the way for the company to issue debt at any time.

A bond offering from Microsoft, which carries top credit ratings from Standard & Poor’s and Moody’s Investors Service, would be in high demand, said Brad Lutz, vice president of investment research at Declaration Management & Research LLC, which manages about $16 billion in fixed-income assets. It helps that the company operates outside the realm of finance, he said.

“Non-financials have generally received a warm reception by the investment-grade capital markets,” Lutz said in an interview from his office in McLean, Virginia. “There’s certainly demand for higher-quality issuers.”

Microsoft, based in Redmond, Washington, dropped 76 cents to $17.53 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have fallen 51 percent this year.

Highest Rating

Microsoft became the first company in a decade to receive the top rating from Standard & Poor’s in September when it decided to raise funds. The bond proceeds would go toward general corporate purposes, including stock buybacks, acquisitions, capital expenditures and working capital.

The company has $4 billion remaining in its debt authorization after selling $2 billion in commercial paper last quarter. The software maker had $20.7 billion in cash and short- term investments as of Sept. 30.

Microsoft is “warming up” to the idea of selling debt after years of resisting requests by shareholders, said Sid Parakh, an analyst at McAdams Wright Ragen in Seattle. He recommends buying Microsoft’s stock.

“They are looking at the credit market -- it’s in turmoil generally, but for a company like Microsoft, they can get a pretty good deal,” Parakh said. “It helps them return more to shareholders by having additional buyback capacity and additional flexibility in terms of term capital.”

AAA Rating

The typical bond rated AAA yields 6.1 percent, or 384 basis points more than similar-maturity Treasuries, according to Merrill Lynch & Co. index data. The average AAA bond in the index matures in eight years. A basis point is 0.01 of a percentage point.

Investment-grade U.S. financial corporate bonds yield 157 basis points more than industrial securities, even though the average rating for finance debt is two grades higher at A+, Merrill Lynch data show. The yield spread between financial and industrial bonds has widened from 120 basis points on Aug. 31 and 31 basis points at the end of last year.

Microsoft initially floated the idea of selling bonds last February, when the company was trying to take over Yahoo! Inc. for $44.6 billion. Chief Executive Officer Jerry Yang rejected the offer, even after it climbed as high as $47.5 billion.

Yang announced this week that he will step down, raising the possibility that a new CEO may reopen talks. Microsoft CEO Steve Ballmer squelched that speculation yesterday, saying his company was “done” with Yahoo acquisition discussions. Ballmer said an Internet-search deal with Yahoo is still “an interesting possibility.”

To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

Last Updated: November 20, 2008 16:09 EST