Capital Markets

Microsoft Eyes Debt-Securities Offering

In a shelf filing, it takes another step toward a move that CFO Chris Liddell discussed during Microsoft's bid to buy Yahoo.
Stephen TaubNovember 21, 2008

Microsoft Corp. is preparing to take its first bite of the debt-securities apple.

The world’s largest software maker has filed a shelf registration to sell debt securities, although the filing did not provide many details — such as when it plans to launch an offering. But it did say it intends to use net proceeds for general corporate purposes, which may include funding for working capital, capital expenditures, repurchases of its stock, and acquisitions. Microsoft also said it would consider either fixed-rate securities or floating-rate securities.

The company, legendary for its cache of balance-sheet cash, has long refrained from issuing debt. When it tried to buy Yahoo Inc. earlier this year, however, published reports did suggest that Microsoft might borrow money to complete the part cash, part stock deal.

“If you look at the cash component rather than focus on the stock component, that’s going to be over $20 billion worth of cash,” Microsoft CFO Chris Liddell was quoted by InformationWeek magazine at that time as having said during an investor presentation. “We could fund most of that through our cash holdings, but it’s likely we’re actually going to borrow for the first time. It will be a mixture of the cash on hand, plus debt.”

In late September, Microsoft said it planned to issue commercial paper for the first time in the company’s history, according to Reuters. Microsoft introduced a $2 billion commercial paper program and said it may issue as much as $6 billion of debt, the wire service said at the time.

It has also been involved in huge share repurchases this year, completing one $40 billion repurchase and then launching another over the next five years.

If Microsoft does go ahead with a debt sale, it would ironically be at the worst time in years, as most highly rated credits have been forced to offer record or near-record spreads to Treasuries to complete recent deals.

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