Microsoft (MSFT) filed documents with the SEC to issue bonds for the first time. CFO Chris Liddell paved the way for this after the Yahoo offer, which Microsoft planned to fund partly through debt. The difference between then and now, however, was that Microsoft had something in particular to spend the money on.
So why is it issuing bonds now, when it already has cash coming out of its ears? To make another pass at Yahoo? To buy Salesforce.com? Another company?
To take advantage of a debt market starved for investments that are probably better credits than the United States government?
Or, most likely, to lever up and buy back a boatload of its own stock, which it considers deeply undervalued. (9X trailing earnings).
[Microsoft] is considering senior unsecured debt securities, according to a regulatory filing today with the U.S. Securities and Exchange Commission. The shelf registration clears the way for the company to issue debt at any time.
A bond offering from Microsoft, which carries top credit ratings from Standard & Poor’s and Moody’s Investors Service, would be in high demand, said Brad Lutz, vice president of investment research at Declaration Management & Research LLC, which manages about $16 billion in fixed-income assets. It helps that the company operates outside the realm of finance, he said.
“Non-financials have generally received a warm reception by the investment-grade capital markets,” Lutz said in an interview from his office in McLean, Virginia. “There’s certainly demand for higher-quality issuers.”
The open question: What is Microsoft planning to do with the cash?
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