Back in June, Microsoft purchased LinkedIn for $26.2 billion in all cash deal. At the time, not many financial details of the deal were available, asides from the total price of the deal. Yesterday, however, Microsoft sold almost $20 billion in bonds in order to finance their LinkedIn deal (via Barron’s.)
According to Barron’s, this is the fifth biggest bond deal in history. According to LDC News, investors are, “weighing Microsoft’s decision to acquire LinkedIn against a backdrop of eroding earnings contributions from traditional personal computer streams.” After the bonds sold, Moody’s, which gives credit ratings and provides credit ratings, research, tools and analysis, kept its current rating of Microsoft. The group, however, did have some warnings and indicate that, “Microsoft may also raise debt to support future dividend and share buybacks such that gross debt could exceed $90 billion in fiscal 2017, up from $35 billion two years ago.”
For those who did not already know, a bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.
So, what do you think of this sale of the Bonds? Do you think it is good for the long term future of Microsoft or LinkedIn? Let us know your thoughts by dropping us a comment below!