NEW YORK – Microsoft is planning its biggest bond sale on record, taking advantage of investor demand for the highest-rated corporate debt.
The company will issue $10.8 billion of securities in six parts, including $2.25 billion of 40-year debt, said a person with knowledge of the transaction. Those bonds are being offered with a yield that’s 153 basis points more than 30-year Treasuries, said the person, who asked not to be identified because of a lack of authorization to speak publicly. The company increased the size of its sale after earlier marketing $7 billion of debt.
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.
“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.”
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.
Proceeds 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 is offering issues maturing in five-, seven-, 10-, 20- and 30 years, the person said.
Tony Imperati, a spokesman for Microsoft, didn’t respond to a telephone call and e-mail seeking comment on the offering.
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.
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