Microsoft Corp on Thursday launched a $2.25 billion sale of bonds in the software giant's third trip to the U.S. dollar investment-grade market.
The company is offering $750 million of five-year notes at a yield spread of 38 basis points over comparable Treasuries.
The second tranche comprises $500 million of 10-year notes, launched at 48 basis points over Treasuries and the third tranche is $1 billion of 30-year bonds at 68 basis points over Treasuries.
Whisper talk circulated earlier at Treasuries plus 40 basis points area on the fives, plus 50 basis points area on the 10s and plus 70 basis points on the 30s. The respective Treasuries were quoted at 2.154%, 3.519% and 4.635%.
It is likely to be one of the more tightly priced bonds this year, and the slight payout won't deter many investors.
The US investment-grade bond market has been flooded with financial issuers this year. Investors looking to diversify out of financials are on the watch for nonfinancial names to buy.
Recent bond offering from industrials Anheuser-Busch InBev Worldwide and Kimberly-Clark have performed well in the primary and secondary markets.
Few are more creditworthy than Microsoft. Its cash pile of almost $41 billion is the envy of corporate America. Most of it is held outside the US, where it generates the bulk of its revenue. The company uses U.S. dollar bond offerings, in part, to repatriate the cash.
In addition, the Redmond, Washington-based company has a mere $8.5 billion in outstanding senior unsecured debt.
During the three months ended December 31 Microsoft repaid $1 billion in commercial paper, leaving no balance. At year end, about $14.7 billion remains on the $40 billion share repurchase program that was announced on September 22 2008. It expires in 2013.
The proceeds from today's trade can be used for share repurchases, among other general corporate purposes, including acquisitions.
Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs, HSBC, Morgan Stanley and RBS are lead managers on the sale.
Last week Microsoft reported record quarterly revenue of $19.95 billion and net profit of $6.63 billion, boosted by strong sales of its Windows operating system and its new Kinect hands-free gaming system.