(Bloomberg) -- Microsoft sold $10.8 billion of debt in its biggest bond sale on record, taking advantage of investor demand for the highest-rated corporate securities.
The worlds largest software maker sold notes in six parts, including $2.25 billion of 40-year obligations with a 4% coupon, according to data compiled by Bloomberg. Those bonds sold at a yield of 153 basis points more than 30-year Treasuries. The company increased its sale by 54% after marketing $7 billion of debt earlier in the day.
There is a lot of demand for quality, and Microsoft doesnt come to market often, they have a ton of cash and you dont worry about giving them your money, said Matthew Duch, a money manager at Calvert Investments in Bethesda, Maryland, which oversees more than $13 billion in assets. Youll get it back.
Microsoft, one of only a handful of companies with top AAA ratings, is benefiting from demand for the safest debt as global growth and inflation remain stagnant. Companies with the highest credit rating have seen their borrowing costs fall to 2.36%, about 63% of the average over the past decade, according to the Bank of America Merrill Lynch AAA US Corporate Index.
RISING SALES
Proceeds from the offering will be used for general corporate purposes, which may include capital expenditures, stock repurchases, acquisitions and debt repayments, according to a regulatory filing Monday with the U.S. Securities and Exchange Commission.
In addition to the 40-year bond the company sold issues of five-, seven-, 10-, 20- and 30-year securities.
Microsoft last issued bonds in December 2013, when it sold $8 billion of securities in dollars and euros, its previous record offering, according to data compiled by Bloomberg.
The companys cash and short-term investments were $90.2 billion as of the most recent quarter with 91% of that held outside the U.S. and subject to material repatriation tax effects if it were to be brought back to the the U.S. for dividends or buybacks, the company said in a filing. The company repurchased $2 billion of its own shares in the quarter.
Tony Imperati, a spokesman for Microsoft, declined to comment on the sale.
Microsofts fiscal second-quarter sales and profit exceeded analysts estimates as the worlds largest software maker benefited from growth in cloud services and a resurgent Xbox One game console. Profit excluding certain costs in the period ended Dec. 31 was 77 cents a share. Revenue rose 8% to $26.5 billion, Bloomberg data show.
In this environment, a company like Microsoft will always get a certain level of demand that other companies wont be able to get, Jody Lurie, a corporate credit analyst at Janney Montgomery Scott in Philadelphia, which manages $61 billion in assets, said in a telephone interview. Its clear investors are looking to put cash to work. Microsoft has tons of cash, but it doesnt want to risk losing this opportunity.
With assistance from Dina Bass in Seattle.
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