Microsoft Corp., the world’s biggest software maker, plans a benchmark sale of bonds a day after its board approved to sell as much as $6 billion in additional debt.
Proceeds may be used to fund working capital, capital expenditures, stock buybacks and acquisitions, the Redmond, Washington-based company said today in a regulatory filing that didn’t disclose the size or timing of the sale. The bonds may be sold as soon as today, a person familiar with the transaction said, who declined to be identified as terms aren’t set.
Microsoft is marketing the debt after yields on investment- grade corporate bonds fell to 3.73 percent yesterday, according to Bank of America Merrill Lynch, the lowest since daily records began on Oct. 31, 1986. Demand for the debt, one of only four nonfinancial U.S. companies with the top credit grade from Standard & Poor’s, will be “huge across the globe,” said Mirko Mikelic, a money manager at Fifth Third Asset Management.
“I’m sure it’s going to be a name everyone’s going to want,” said Mikelic, who helps oversee $13 billion of fixed- income assets in Grand Rapids, Michigan. “It’s a triple-A credit, great company, well-run, what’s there not to like, other than the pricing?”
Microsoft plans to sell 3-, 5-, 10- and 30-year bonds, according to the filing. Benchmark offerings are typically at least $500 million. The company will use the cash to pay for dividends and share repurchases because much of its cash is held overseas, a person familiar with the matter said last week.
S&P also ranks Exxon Mobil Corp., Johnson & Johnson, and Automatic Data Processing Inc. as AAA, the same level it assigns to U.S. government debt.
The debt will likely price similarly to drugmaker J&J, which sold $1.1 billion of bonds at the lowest interest rates on record for 10-year and 30-year securities last month, Mikelic said.
Microsoft reported $36.8 billion in cash and short-term investments at the end of last quarter. Much of that is held overseas, forcing the company to pay taxes on the money if it uses it for dividends or stock repurchases.
The company boosted its quarterly dividend by 3 cents, or 23 percent, to 16 cents a share yesterday.
“This higher dividend, combined with our ongoing share repurchase program, reflects our commitment to returning capital to our shareholders and our confidence in the long-term growth of the company,” Microsoft Chief Financial Officer Peter Klein said yesterday in a statement.
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