Microsoft Announces Debt Offerings

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Microsoft Corp. on Thursday announced the pricing of its offering of $13 billion aggregate principal amount of senior unsecured notes. The notes consist of the following tranches:
  • $1.75 billion of 1.300 percent notes due November 3, 2018
  • $2.25 billion of 2.000 percent notes due November 3, 2020
  • $1.00 billion of 2.650 percent notes due November 3, 2022
  • $3.00 billion of 3.125 percent notes due November 3, 2025
  • $1.00 billion of 4.200 percent notes due November 3, 2035
  • $3.00 billion of 4.450 percent notes due November 3, 2045
  • $1.00 billion of 4.750 percent notes due November 3, 2055

Microsoft intends to use the net proceeds from the offering for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt. The offerings are expected to close on November 3, 2015.
 
They need money to pay board members their bonuses.
 
Corporate bonds are nothing new or unique, we just haven't heard much about them due to the historically low interest rates making bonds unattractive for most investors. Even these yields are fairly paltry and comparable to bank CD rates.

For those not interested in purchasing bonds, but interested in the direction of major technology companies, this announcement is somewhat telling. Investors will only be willing to purchase long-term bonds of companies that are seen to be stable and have growth/profit in the long-term. If the Microsoft board is confident in issuing these bonds, that speaks volumes for the future of the company.

If more companies, especially companies not known for issuing bonds, follow suit, that would be a big alert that long-term interest rates are about to go up a significant percentage. If you "know" (and we won't ask how these entrenched money managers know these things) that interest rates are going up, you want to get people to buy your bonds now, so you won't have to pay as much interest as if you issued them a year or two later.
 
DocSavage said:
If your money grows slower than inflation, aren't you just giving away money?
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I was about to ask the same. But I'd have to imagine there are tax boons or some other loophole BS to cover it otherwise no one would buy in to this.
 
jardows said:
Corporate bonds are nothing new or unique, we just haven't heard much about them due to the historically low interest rates making bonds unattractive for most investors. Even these yields are fairly paltry and comparable to bank CD rates.

For those not interested in purchasing bonds, but interested in the direction of major technology companies, this announcement is somewhat telling. Investors will only be willing to purchase long-term bonds of companies that are seen to be stable and have growth/profit in the long-term. If the Microsoft board is confident in issuing these bonds, that speaks volumes for the future of the company.

If more companies, especially companies not known for issuing bonds, follow suit, that would be a big alert that long-term interest rates are about to go up a significant percentage. If you "know" (and we won't ask how these entrenched money managers know these things) that interest rates are going up, you want to get people to buy your bonds now, so you won't have to pay as much interest as if you issued them a year or two later.
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One of the main uses of this money will probably be to fund operating expenses while keeping profits off-shore in the hopes of another tax holiday like there was in 2005. In the interim, the bond proceeds pay daily expenses and a portion of prior earned gross profits get slowly repatriated to make the interest and principal payments... with no tax consequences for those funds used to repay these bond related debts.
 
As ubiquitous as MS is it's bold to posit that even they will be relevant in 40 years.
 
OEM said:
They need money to pay board members their bonuses.
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Actually they usually borrow money to pay dividends and get a tax break rather than import cash holdings residing overseas and pay tax on them. Given the rates, I suspect that is still the primary use.
 
Teenyman45 said:
Forget less than inflation. During the crash around 2008, some very short term US Federal paper was trading at slightly negative rates.
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There are certain Swiss and I believe Swedish treasuries that are going for negative yields either right now or as of very recently. It's a bizarre concept at first glance, but it really is just a length people are willing to take to park their money.

And before anyone mentions it these few measly fractions of a percent yield isn't nearly as much as how much value gold and commodities have shed in recent years.
 
This is how you bring money onshore without paying taxes which would be at a much higher rate than these bond. These bonds are below inflation, it's essentially free money. And they are unsecured because of Microsoft's top credit rating.

This is just the business of business. Nothing to see here.
 
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