Microsoft completes $17B bond sale, will use proceeds for repayment of debt used to help fund its acquisition of LinkedIn
Tech giant will use proceeds to refinance short-term debt — Credit graders maintain AAA rating on Microsoft debt — Microsoft Corp. found ample demand …
Context & Ripple Effects
This closes the financing loop on Microsoft's $26.2B purchase of LinkedIn announced in June 2016: rather than repaying the short-term borrowing used to fund the deal out of cash on hand, the company is terming it out through a $17B bond sale that credit graders rated AAA. The strong demand Bloomberg reports reflects that top-tier rating, which few issuers of this size still carry.
The refinance lands mid-stream in a period of heavy shareholder returns — Microsoft had just authorized a second $40B buyback months earlier, and would go on to match its largest-ever authorization with a $60B program in 2024. Keeping acquisition debt long-dated and cheap preserves room for both.
First-order effects
- Microsoft swaps short-term LinkedIn-related debt for long-term fixed-rate bonds, locking in AAA-level pricing and removing near-term repayment pressure from its balance sheet.
- Bond buyers get scarce AAA-rated corporate paper from a mega-cap issuer, which is why demand was ample despite the size of the sale.
Second-order effects
- With the acquisition debt termed out at low cost, Microsoft can keep running concurrent capital-return programs — the $40B buyback and dividend hikes already underway — without choosing between deleveraging and payouts.
- A clean post-deal balance sheet also lowers the internal hurdle for future large acquisitions, since the LinkedIn template shows mega-deals can be bridged short-term then refinanced cheaply.
Third-order effects
- If the pattern holds, top-rated tech balance sheets become a structural funding advantage in M&A: companies holding AAA ratings can absorb large acquisitions and refinance them at costs rivals cannot match, widening the gap between mega-caps and everyone else.
- Sustained cheap debt plus recurring buybacks points toward big tech normalizing permanent leverage — carrying bonds indefinitely against growing cash flows rather than paying them down.
The trend: Mega-cap tech is turning elite credit ratings into a standing M&A and capital-returns engine, refinancing acquisition debt cheaply while buyback programs grow ever larger.