Microsoft closes $8B in dollar and euro-denominated debt sales

Microsoft (MSFT) has finished selling $8B worth of debt in a massive dual-currency offering. In addition to selling €3.5B worth of euro-denominated bonds, the software giant has sold $3.25B worth of dollar-denominated debt.

Unsurprisingly, the yields for the dollar-denominated notes are also quite low. $1.25B worth of 5-year bonds carry an interest rate spread of just 35 bps relative to comparable Treasurys; $1.5B worth of 10-year bonds have a 90 bps spread, and $500M worth of 30-year bonds have a 105 bps spread.

Microsoft isn't saying much about what it plans to do with the proceeds, but buybacks are a good bet. In addition to boosting EPS, eliminating shares via buybacks removes the dividend payments (current yield of 2.9%) attached to them.

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Comments (11)
  • Bill Maurer
    , contributor
    Comments (7058) | Send Message
    Company's US cash balance was under $5 billion, as I've been writing about for weeks. This makes perfect sense.
    3 Dec 2013, 07:19 PM Reply Like
  • brea
    , contributor
    Comments (49) | Send Message
    all these tech co's buying back shares w/ proceeds from bond sales.
    sure it raises stock price initially though doesn't change dynamics
    of an obvious inability to grow the companies organically.
    then.......I suppose they'll do a greater share offering
    3 Dec 2013, 07:39 PM Reply Like
  • justaminute
    , contributor
    Comments (1558) | Send Message
    Why issue shares that carry the liability of a dividend when they can issue debt at less than the cost of the dividends on the shares they retire?
    3 Dec 2013, 09:20 PM Reply Like
  • King Rat
    , contributor
    Comments (1610) | Send Message
    That sounds like Warren Buffett talking and I have to say I disagree with him on his allowable conditions for buybacks.


    The problem I have is with companies increasingly issuing debt to buy back stock. It smacks of WACC manipulation in some b-school corporate simulation.


    What I don't get is the process of buying back stock via Euro-denominated bond purchases. Do they buy back MSFT via EDR or do they have to (re)patriate Euros? If they have to repatriate Euros could they not be subject to tax based on Euro Zone earned income?
    4 Dec 2013, 01:27 AM Reply Like
  • brea
    , contributor
    Comments (49) | Send Message
    justaminute - my point was it's a wash,rinse,repeat
    after selling bonds, doing the "buyback", they'll
    reissue new shares to raise capital under pretext
    of "improved liquidity".
    it's all just p/e expansion on the back of "clever"
    accntg. at some point the actual "business" will
    become the focus. when remains the question
    4 Dec 2013, 09:24 AM Reply Like
  • Tack
    , contributor
    Comments (16265) | Send Message
    All these clever financial gymnastics. Here's a novel idea: how about making something new that folks want to buy.
    3 Dec 2013, 09:30 PM Reply Like
  • ratnamsub
    , contributor
    Comments (452) | Send Message
    Tact, to make something new that folks want to buy is the wish of every company. Only a very few with great innovation and marketing skills had been successful so far. Microsoft lacks both. Microsoft is very good in making something already innovated by somebody else better, practical and affordable. If anyone is expecting Microsoft to come out with something brand new that folks want to buy are most probably chasing the rainbow.
    4 Dec 2013, 07:08 AM Reply Like
  • ratnamsub
    , contributor
    Comments (452) | Send Message
    This action is a positive outlook for Microsoft at this moment. How is it going to progress in the device business is the one what all investors are looking forward to. It is still early. There are a lot of changes at Microsoft. What will yield still remains unclear. Expect a lot of Microsoft activity in 2014.
    3 Dec 2013, 09:32 PM Reply Like
  • EMS
    , contributor
    Comments (586) | Send Message
    Thanks FED ! Are they the ones that will be left holding this 30 yr paper when interest rates start to really move ??
    3 Dec 2013, 10:51 PM Reply Like
  • Cagdas Ozgenc
    , contributor
    Comments (405) | Send Message
    A lot if ignorant and moronic responses again to buybacks. Balance sheet management is an essential task for every company. I am very happy that Microsoft, Apple, whoever, is taking advantage of FED and ECB, hence milking dollar and euro holders to the utmost extent, at these artificially low interest rates. They are doing the right service to their shareholders. If you are going to blame somebody blame the governments and central banks, not the companies. When you artificially set interest rates, missallocation of capital is inevitable from the perspective of common welfare, but from the shareholder perspective it is great.
    4 Dec 2013, 07:27 AM Reply Like
  • SA Daniel Makover
    , contributor
    Comments (17) | Send Message
    Very Interesting :-p
    9 Mar, 07:15 AM Reply Like
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