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There are only three U.S. companies with Standard & Poor’s highest AAA rating: ExxonMobil, Johnson & Johnson and Microsoft.
Microsoft’s stellar rating is one reason investors eagerly snapped up $10.75 billion of corporate bonds Microsoft issued Monday. Even though bonds offer relatively low returns, investors’ demand for these relatively safe investments currently outstrips their supply, says Brian Rehling of Wells Fargo Investment Institute.
Microsoft has plenty of cash on hand, says David Tsui, a credit analyst at Standard & Poor’s, but the company may have issued these bonds to avoid having to bring some of that cash from overseas into the U.S., which would trigger taxes.
It may also be looking to lock in low interest rates ahead of potential increases, says Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School.
The company says its plans to use the new billions for “general corporate purposes.” Marilyn Cohen, president of Envision Capital Management, says that may include stock repurchases, debt repayments and possible increases in its dividend.
In other words, shareholders might see some cash or a boost in stock price, the company gets cheap money, investors get the bonds they want. Cohen calls it “a win-win-win.”