Cisco reportedly selling $7B+ in debt to pay for buybacks, existing debt

Cisco (CSCO -0.1%) has filed a shelf registration for a debt offering whose proceeds the company plans to use to pay down $3.75B in debt maturing this year, and to finance its dividend (recently hiked) and buyback program (expanded by $15B in November).

Reuters reports Cisco is raising at least $7B. The networking giant is said to be offering floating rate notes with three maturities (18-month, 3-year, and 5-year), and fixed-rate notes with four maturities (3-year, 5-year-, 7-year, and 10-year). Informa's Ken Jacques states $17B worth of orders have been placed.

With demand for blue-chip corporate debt remaining strong, interest rates are bound to be low. Reuters states Cisco's 3-year fixed notes is set to carry only a 45bps premium to comparable Treasurys, and its 10-year fixed notes only a 105 bps premium.

Cisco had $47.1B in cash/investments as of Jan. 25 (much of it offshore), and $17.1B in debt.

From other sites
Comments (5)
  • DeepValueLover
    , contributor
    Comments (11312) | Send Message
    Why more companies are not selling expensive debt to buy cheap shares I do not know!


    Good move CSCO!
    24 Feb 2014, 02:17 PM Reply Like
  • 11146471
    , contributor
    Comments (1379) | Send Message
    While I believe that CSCO is a good company and a cheap one also, It doesn't make sense to borrow money to buy back your stock!


    Investing your free cash flow is a different thing. Borrowing is another!
    24 Feb 2014, 03:16 PM Reply Like
  • Daniel Radakovich
    , contributor
    Comments (1016) | Send Message
    If it is undervalued, why not?
    24 Feb 2014, 11:19 PM Reply Like
  • combatcorpsmanVN
    , contributor
    Comments (1357) | Send Message
    $CSCO - Current rates are more attractive to borrow money than to use Free Cash Flow. One of the reasons Icahn is beating up AAPL for not buying back more stock using borrowed funds. Cost of borrowed funds is a bargain now.


    CSCO's move here makes a lot of sense to me.
    24 Feb 2014, 06:01 PM Reply Like
  • User 7140591
    , contributor
    Comments (20) | Send Message
    Agreed. This makes sense. Its good to have sophisticated management that doesn't fall prey to the talking points of the day with regard to debt. When cheap money is available, you use it. Especially when the money is very likely to earn an ROI far exceeding the borrowing costs.
    25 Feb 2014, 10:11 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs