Bloomberg
Microsoft Corp., one of four non- financial U.S. companies with AAA ratings, sold $4.75 billion of bonds, including three- and five-year maturities at the lowest coupons on record.
The company’s $1 billion of 0.875 percent notes due in 2013 and $1.75 billion of 1.625 percent debt maturing in 2015 have the lowest interest rates of more than 3,500 securities in the Barclays Capital U.S. Corporate Index of investment-grade company debt.
The world’s biggest software maker sold the bonds a day after its board boosted its dividend and approved the issuance of as much as $6 billion in new debt. The offering came as yields on investment-grade debt fell to 3.718 percent, the lowest level since daily records began on Oct. 31, 1986, according to Bank of America Merrill Lynch index data.
“A name like Microsoft is always going to garner the biggest and best investors,” said Anne Daley, managing director at Barclays Capital in New York, which helped underwrite the sale.
Microsoft, based in Redmond, Washington, also sold $1 billion each of 10- and 30-year bonds, according to data compiled by Bloomberg. The 4.5 percent, 30-year debt tied for the lowest coupon with an issue last month from Johnson & Johnson.
Cash Held Overseas
Proceeds from Microsoft’s sale may be used to fund working capital, capital expenditures, stock buybacks and acquisitions, the company said today in a regulatory filing. The company also plans to pay for dividends and share repurchases because much of its cash is held overseas, a person familiar with the matter said last week.
Peter Wootton, a Microsoft spokesman, wasn’t available to comment today.
The 3-year notes yield 25 basis points more than similar- maturity Treasuries; the 5-year debt pays a 40 basis-point spread; the 3 percent securities due in 2020 pay 55 basis points; and 30-year bonds pay 83 basis points, Bloomberg data show. A basis point is 0.01 percentage point.
Spreads on investment-grade debt rose 1 basis point today to 184 basis points, Bank of America Merrill Lynch index data show.
Standard & Poor’s and Moody’s Investors Service also rank Exxon Mobil Corp., Johnson & Johnson and Automatic Data Processing Inc. as AAA, or an equivalent Aaa, the same level they assign to U.S. government debt.
Higher Dividend
Microsoft reported $36.8 billion in cash and short-term investments at the end of last quarter. Much of that is held overseas, forcing the company to pay taxes on any of the money used for dividends or stock repurchases.
Microsoft boosted its quarterly dividend by 3 cents, or 23 percent, to 16 cents a share yesterday.
The dividend and share repurchase programs reflect Microsoft’s commitment to returning capital to shareholders and confidence in its long-term growth prospects, Chief Financial Officer Peter Klein said yesterday in a statement.
“You can take it as a sign of soft expected future stock- market performance,” said Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “Microsoft doesn’t have a lot of acquisition opportunities, doesn’t have a lot to do internally, apparently, with this capital, so they’re giving it back to shareholders.”
Debut Sale
Microsoft sold its first bond in May 2009, a $3.75 billion offering, in a bid to diversify its capital structure and add to its cash pile for acquisitions, capital expenses and share buybacks. The sale comprised $2 billion of 2.95 percent, 5-year notes; $1 billion of 4.2 percent, 10-year debt; and $750 million of 5.2 percent, 30-year bonds.
In June, Microsoft raised $1.15 billion of interest-free financing from its first sale of convertible bonds.
“It’s a perfect storm for issuers right now between low rates, tight spreads and the fact that investors continue to have cash to put to work,” Daley said. “We expect the active new issue calendar to continue.”
In addition to Barclays, Citigroup Inc. and JPMorgan Chase & Co. helped underwrite today’s sale.
The company’s $1 billion of 0.875 percent notes due in 2013 and $1.75 billion of 1.625 percent debt maturing in 2015 have the lowest interest rates of more than 3,500 securities in the Barclays Capital U.S. Corporate Index of investment-grade company debt.
The world’s biggest software maker sold the bonds a day after its board boosted its dividend and approved the issuance of as much as $6 billion in new debt. The offering came as yields on investment-grade debt fell to 3.718 percent, the lowest level since daily records began on Oct. 31, 1986, according to Bank of America Merrill Lynch index data.
“A name like Microsoft is always going to garner the biggest and best investors,” said Anne Daley, managing director at Barclays Capital in New York, which helped underwrite the sale.
Microsoft, based in Redmond, Washington, also sold $1 billion each of 10- and 30-year bonds, according to data compiled by Bloomberg. The 4.5 percent, 30-year debt tied for the lowest coupon with an issue last month from Johnson & Johnson.
Cash Held Overseas
Proceeds from Microsoft’s sale may be used to fund working capital, capital expenditures, stock buybacks and acquisitions, the company said today in a regulatory filing. The company also plans to pay for dividends and share repurchases because much of its cash is held overseas, a person familiar with the matter said last week.
Peter Wootton, a Microsoft spokesman, wasn’t available to comment today.
The 3-year notes yield 25 basis points more than similar- maturity Treasuries; the 5-year debt pays a 40 basis-point spread; the 3 percent securities due in 2020 pay 55 basis points; and 30-year bonds pay 83 basis points, Bloomberg data show. A basis point is 0.01 percentage point.
Spreads on investment-grade debt rose 1 basis point today to 184 basis points, Bank of America Merrill Lynch index data show.
Standard & Poor’s and Moody’s Investors Service also rank Exxon Mobil Corp., Johnson & Johnson and Automatic Data Processing Inc. as AAA, or an equivalent Aaa, the same level they assign to U.S. government debt.
Higher Dividend
Microsoft reported $36.8 billion in cash and short-term investments at the end of last quarter. Much of that is held overseas, forcing the company to pay taxes on any of the money used for dividends or stock repurchases.
Microsoft boosted its quarterly dividend by 3 cents, or 23 percent, to 16 cents a share yesterday.
The dividend and share repurchase programs reflect Microsoft’s commitment to returning capital to shareholders and confidence in its long-term growth prospects, Chief Financial Officer Peter Klein said yesterday in a statement.
“You can take it as a sign of soft expected future stock- market performance,” said Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “Microsoft doesn’t have a lot of acquisition opportunities, doesn’t have a lot to do internally, apparently, with this capital, so they’re giving it back to shareholders.”
Debut Sale
Microsoft sold its first bond in May 2009, a $3.75 billion offering, in a bid to diversify its capital structure and add to its cash pile for acquisitions, capital expenses and share buybacks. The sale comprised $2 billion of 2.95 percent, 5-year notes; $1 billion of 4.2 percent, 10-year debt; and $750 million of 5.2 percent, 30-year bonds.
In June, Microsoft raised $1.15 billion of interest-free financing from its first sale of convertible bonds.
“It’s a perfect storm for issuers right now between low rates, tight spreads and the fact that investors continue to have cash to put to work,” Daley said. “We expect the active new issue calendar to continue.”
In addition to Barclays, Citigroup Inc. and JPMorgan Chase & Co. helped underwrite today’s sale.
