Microsoft has announced that they will be offering $10.75 billion of senior unsecured notes with the offering expected to close on February 12th, 2015.
Microsoft says that they will be using the proceeds from the offering for general corporate purposes. The notes will span a time window of up to forty years and a breakdown of all the notes are listed below.
- $1.50 billion of 1.850 percent notes due Feb. 12, 2020
- $1.50 billion of 2.375 percent notes due Feb. 12, 2022
- $2.25 billion of 2.700 percent notes due Feb. 12, 2025
- $1.50 billion of 3.500 percent notes due Feb. 12, 2035
- $1.75 billion of 3.750 percent notes due Feb. 12, 2045
- $2.25 billion of 4.000 percent notes due Feb. 12, 2055
The offering makes a lot of sense given the company's current position and how the market is faring at this time. What we mean is that interest rates are low, so it's a good time to offer these notes; so low in fact that it is cheaper to offer debt like this than to try and repatriate funds that are currently locked up abroad. By offering these notes, it's an easy way to fill up the local bank accounts while paying a low interest rate.
The longest notes, which spans forty years, are the most interesting of the group. Seeing how quickly a technology company can go bust these days, thinking Microsoft will be around in forty years and in a position to payback $2.25 billion is a risky bet. We know that these notes will change hands dozens and maybe even hundreds of times before they expire as they will be bundled into asset packages and be sold to investors looking for stable returns with lower-risk thresholds.
Microsoft will soon have an extra $10 billion in its US bank accounts and while the company may not be talking publicly about what it will be doing with its cash, they have been buying up companies on a frequent basis.