Microsoft sells over $10 billion in bonds

Tracey Samuelson Feb 10, 2015
HTML EMBED:
COPY

Microsoft sells over $10 billion in bonds

Tracey Samuelson Feb 10, 2015
HTML EMBED:
COPY

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.” 

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.

Raise a glass to Marketplace!

Just $7/month gets you a limited edition KaiPA pint glass. Plus bragging rights that you support independent journalism.
Donate today to get yours!