Microsoft set to sell first long-term bonds
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Microsoft Corp.’s cash hoard has long been the envy of most banks. Today, in what may look like a case of topping off the gas tank, the company is coming to market with its first-ever bond sale, to further boost its cash holdings.
The software titan is expected to sell a total of $3.75 billion in 5-, 10- and 30-year debt, Bloomberg News reports.
With $25 billion in cash and short-term investments on its balance sheet, Microsoft already is swimming in liquidity. But with its stock price no higher today than it was at the end of 2000, the company can justify using relatively low-cost debt to fund its ongoing share-buyback program.
Microsoft in September committed to buying back up to $40 billion of stock through 2013. The share price was $25.40 on the day of the announcement; the stock is trading around $19.50 today.
What’s more, after the company’s failed bid for Yahoo Inc. last year, rumors have continued to swirl about other potential blockbuster merger deals Microsoft might pursue.
In the prospectus for the bond deal, Microsoft says it plans to use the proceeds for general corporate purposes, ‘which may include funding for working capital, capital expenditures, repurchases of our stock and acquisitions.’
From Bloomberg:
‘The company is not in need of financing,’ Microsoft said today in an e-mailed statement. It’s ‘taking advantage of good market conditions, and Microsoft’s great credit rating.’ Microsoft 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.
The company’s bonds are expected to yield about 1 percentage point above what the U.S. Treasury pays to borrow. That would mean an annualized yield of about 4.2% on the 10-year debt, for example.
-- Tom Petruno