Low rates spur $10.75 billion Microsoft bond sale

Microsoft took out the biggest package of loans in its history, capitalizing on low interest rates to borrow cheaply to pay for share buybacks and dividends.

Microsoft sold bonds worth $10.75 billion on Monday, the company said. The sale is the first time Microsoft has tapped long-term debt markets since a company-record $8 billion bond sale in December 2013.

The company isn’t short on cash. Microsoft held $90 billion in cash and short-term investments at the end of December.

But the Redmond company, like many U.S. companies with a global reach, holds much of its money offshore to avoid paying a U.S. corporate tax rate that is among the highest in the world.

In borrowing domestically, companies determine that it’s cheaper to fund their operations by paying interest on debt than it would be to rely on repatriated cash taxed at the 35 percent corporate rate. Microsoft rival Apple borrowed $6.5 billion last week.

“When you have tech companies that are cash-rich, it’s fairly common that they issue debt because they don’t want to pay taxes,” said David Tsui, an analyst with Standard & Poor’s Ratings Services.

Tsui said S&P’s sterling AAA rating on Microsoft’s debt wasn’t endangered by the new borrowing. “My sense is they’re not going to do anything to jeopardize their rating,” he said.