Cisco Systems Inc. (CSCO), the world’s largest maker of networking gear, sold $4 billion of bonds in its fourth offering since going public in 1990, joining other technology companies tapping the debt market this year.
Vodafone Group Plc (VOD), the world’s biggest mobile-phone operator, also issued $1.1 billion of bonds, according to data compiled by Bloomberg.
Microsoft Corp. and Juniper Networks Inc. previously sold debt in 2011. Cisco plans to use proceeds from its three-part issue for general corporate purposes, according to a statement from the San Jose, California-based company today distributed by Marketwire.
“Their balance sheet is saying $35 billion of short-term investments and almost $5 billion in cash at the end of January, so it’s not as if they need this money for anything in particular,” said Lon Erickson, a money manager who helps oversee $9 billion of fixed-income assets for Thornburg Investment Management Inc. in Santa Fe, New Mexico. “My guess is they’re going to borrow it and take marginally more leverage on the balance sheet and buy back stock.”
Cisco’s board authorized as much as $10 billion for a stock buyback program on Nov. 18, according to a statement. The company said it had $12.7 billion in remaining repurchase authorizations on Feb. 9, when it reported second-quarter results.
The company sold $2 billion of three-year fixed-rate notes that yield 50 basis points more than similar-maturity Treasuries, $750 million of six-year securities that pay a spread of 105 basis points and $1.25 billion of three-year floating-rate debt at 25 basis points more than the three-month London interbank offered rate, Bloomberg data show.
Cisco last sold bonds in November 2009, issuing $5 billion of securities, including $500 million of 5-year notes, $2.5 billion of 10-year securities and $2 billion of 30-year debt, the data show. Cisco is graded A1 by Moody’s Investors Service, the fifth-highest level, and a comparable A+ by Standard & Poor’s.
“It’s just a big company, strong financially, great market position,” Erickson said. “They’ll print, on a spread basis and all-in-yield basis, some pretty cheap debt.”
Vodafone sold $600 million of 5-year notes that yield 85 basis points more than similar-maturity Treasuries and $500 million of 10-year securities at a spread of 100 basis points, Bloomberg data show. The company earlier marketed $1 billion of debt, according to the person with knowledge of that sale, who declined to be identified citing lack of authorization to speak publicly about the transaction.
Eastman Kodak Co., the business founded in 1880 that popularized film photography, and Dresser-Rand Group Inc. are among other companies marketing debt, according to people familiar with their offerings, who declined to be identified because terms aren’t set.
Company bond sales in the U.S. so far this week of at least $26.1 billion are the highest since the $39.3 billion in the first three days of the week beginning Jan. 3.
Bank of America Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley and Wells Fargo & Co. are managing Cisco’s sale, according to the statement.
Microsoft, the world’s largest software maker, sold $2.25 billion of debt last month in three parts, including $1 billion of 30-year 5.3 percent bonds. Juniper, a supplier of security systems and routing equipment to Internet service providers, sold $1 billion of debt in its debut offering on Feb. 28.
A basis point is 0.01 percentage point.
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