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August 2, 2016

Microsoft sells $19.75bn in bonds to fund LinkedIn acquisition

News: Third-largest US corporate bond sale of the year.

By CBR Staff Writer

Microsoft has sold around $20bn in bonds to fund its acquisition of social network LinkedIn.

It is the third-largest US corporate bond sale of this year, after Anheuser-Busch InBev and Dell. Microsoft issued $19.75bn of debt with seven maturities.

The fifth largest corporate bond sale on record was met with strong demand as fixed income investors were searching for additional income. Investors put in over $50bn of orders to become a part of the biggest bond sale.

Bloomberg reported that the massive demand helped the software giant to borrow at lower rates than it paid for the $13bn of bonds it raised in October.

Citing people familiar with the deal, the news agency said it also saved about $40m in annual interest payments compared with what it was offering to pay initially.

Microsoft’s sale included fixed-rate notes maturing in between 3 and 40 years. The investor demand was strong for 10 and 30 year bonds papers.

The deal included $4bn of 10 year notes, which was valued with a yield of 90 basis points above the benchmark US Treasury, or about 2.42%.

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Fresh 30 year bonds priced with a yield of 3.73%, 5 base points higher than existing debt that matures in 2045.

Microsoft will primarily use the funds to fund the LinkedIn transaction, which is expected to close by the end of this year.

However in the official regulatory filing, the company added that the proceeds from this bond sale may also be used for general corporate purposes including working capital, capital expenditures, repurchases of its capital stock, acquisitions and repayment of existing debt.

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