The company, one of three non-financial companies with top AAA ratings, is believed to be selling $13 billion in debt.
Microsoft tapped the bond market for $13 billion Thursday, its biggest sale ever, in the busiest session of the month for high-grade issuers.
The seven-part deal eclipsed a mark set just eight months ago by the tech giant as it raises money to repurchase stock and repay existing debt. It sold its longest portion, a 40-year bond, at a yield that was 1.8 percentage points more than comparable government debt, according to data compiled by Bloomberg.
Mead Johnson Nutrition and Dr Pepper Snapple Group also sold bonds Thursday.
The company sold $3 billion of 10-year notes at a spread of 0.18 percentage point more than its similar maturity debt in the secondary market on Wednesday.
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“This is a banner year for tech issuance, so they needed to price wide to get people to take down $13 billion,” CreditSights analyst Jordan Chalfin said in an interview. “For Microsoft, an extra five-10 basis points doesn’t really matter. Their debt-funded share buybacks are very accretive for equity holders.”
Microsoft, one of only three non-financial companies with top AAA credit ratings, said in a filing on Thursday that it will use the proceeds for anything from working capital to stock repurchases and repayment of existing debt.
Wells Fargo analysts led by Nicole Black forecast in an Oct. 23 note that the software company would have to offer a new issue concession of as much as 0.15 percentage point to lure debt buyers to a large deal.
The company is likely taking advantage of its “attractive” cost of debt financing to issue before a potential Federal Reserve interest rate increase in December, Black wrote.
The company issued $10.8 billion of securities in February, at the time its biggest bond sale ever. Microsoft’s bonds traded in the tightest band among its high-grade tech peers, CreditSights analysts wrote in an Oct. 25 note before the bond sale.
Microsoft shares are trading near a 15-year high after the company reported last week that profit exceeded analysts’ estimates in the quarter ended Sept. 30, buoyed by demand for Internet-based programs that handle business tasks and host companies’ applications.
Chief Executive Officer Satya Nadella has been focused on selling Microsoft’s Azure cloud services and Office 365 subscription-based products, bolstering the company’s new Intelligent Cloud and Productivity segment. Office 365 added 3 million consumer subscribers and revenue from the commercial version grew almost 70 percent in constant currency, while Azure sales more than doubled from a year earlier.
Microsoft shares fell 0.6 percent to $53.36 on Thursday. They’ve gained nearly 15 percent this year, compared with a 1.5 percent gain in the Standard & Poor’s 500 Index.