Microsoft Sells Record $10.8 Billion of Bonds in 6-Part OfferingCordell Eddings and Elliott Stam
Microsoft Corp. sold $10.8 billion of debt in its biggest bond sale on record, taking advantage of investor demand for the highest-rated corporate securities.
The world’s largest software maker sold notes in six parts, including $2.25 billion of 40-year obligations with a 4 percent coupon, according to data compiled by Bloomberg. Those bonds sold at a yield of 153 basis points more than 30-year Treasuries. The company increased its sale by 54 percent after marketing $7 billion of debt earlier in the day.
“There is a lot of demand for quality, and Microsoft doesn’t come to market often, they have a ton of cash and you don’t worry about giving them your money,” said Matthew Duch, a money manager at Calvert Investments in Bethesda, Maryland, which oversees more than $13 billion in assets. “You’ll get it back.”
Microsoft, one of only a handful of companies with top AAA ratings, is benefiting from demand for the safest debt as global growth and inflation remain stagnant. Companies with the highest credit rating have seen their borrowing costs fall to 2.36 percent, about 63 percent of the average over the past decade, according to the Bank of America Merrill Lynch AAA US Corporate Index.
Proceeds from the offering will be used for general corporate purposes, which may include capital expenditures, stock repurchases, acquisitions and debt repayments, according to a regulatory filing Monday with the U.S. Securities and Exchange Commission.
In addition to the 40-year bond the company sold issues of five-, seven-, 10-, 20- and 30-year securities.
Microsoft last issued bonds in December 2013, when it sold $8 billion of securities in dollars and euros, its previous record offering, according to data compiled by Bloomberg.
The company’s cash and short-term investments were $90.2 billion as of the most recent quarter with 91 percent of that held outside the U.S. and subject to “material repatriation tax effects” if it were to be brought back to the the U.S. for dividends or buybacks, the company said in a filing. The company repurchased $2 billion of its own shares in the quarter.
Tony Imperati, a spokesman for Microsoft, declined to comment on the sale.
Microsoft’s fiscal second-quarter sales and profit exceeded analysts’ estimates as the world’s largest software maker benefited from growth in cloud services and a resurgent Xbox One game console. Profit excluding certain costs in the period ended Dec. 31 was 77 cents a share. Revenue rose 8 percent to $26.5 billion, Bloomberg data show.
“In this environment, a company like Microsoft will always get a certain level of demand that other companies won’t be able to get,” Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, which manages $61 billion in assets, said in a telephone interview. “It’s clear investors are looking to put cash to work. Microsoft has tons of cash, but it doesn’t want to risk losing this opportunity.”