Microsoft prices, posts early exchange tenders, ups cap for one pool

By Wendy Van Sickle

Columbus, Ohio, May 14 – Microsoft Corp. announced the early results and pricing of its offer to exchange 10 series of existing notes for up to $6.25 billion of new 2.525% 2050 notes and cash, and upsized its offer to exchange four series of existing notes for new 2060 notes and cash.

Microsoft will now issue up to $3.75 billion of new 2.675% 2060 notes as a result of the exchange offer, upsized from an original cap of $3 billion.

Holders had tendered $7,629,935,000 of notes under the first offer for the 10 series and $4,854,089,000 of notes under the second offer for the four series as of 5 p.m. ET on May 13, the early exchange date.

The exchange offers will expire at 11:59 p.m. ET on May 28. The settlement date is expected to be June 1.

First pool

The 10 series of existing notes in the first pool are as follows, listed in order of acceptance priority with the amounts tendered as of the early exchange date and the cash amount per $1,000 principal amount, which will be paid in addition to $1,000 principal amount of new notes:

• $316.27 million of the $500 million 4.875% notes due 2043 (Cusip: 594918AX2) with a cash payment of $441.62 set using the 30-year Treasury plus 110 basis points;

• $224,322,000 of the $1 billion 5.3% notes due 2041 (Cusip: 594918AM6) with a cash payment of $486.31 set using the 30-year Treasury plus 105 bps;

• $1,774,667,000 of the $3 billion 4.45% notes due 2045 (Cusip: 594918BL7) with a cash payment of $388.59 set using the 30-year Treasury plus 110 bps;

• $1,443,710,000 of the $3 billion 4.25% notes due 2047 (Cusip: 594918CA0) with a cash payment of $363.95 set using the 30-year Treasury plus 110 bps;

• $191,415,000 of the $750 million 5.2% notes due 2039 (Cusip: 594918AD6) with a cash payment of $458.92 set using the 30-year Treasury plus 95 bps;

• $427,782,000 of the $1 billion 4.5% notes due 2040 (Cusip: 594918AJ3) with a cash payment of $360.57 set using the 30-year Treasury plus 100 bps;

• $252,918,000 of the $500 million 3.75% notes due 2043 (Cusip: 594918AU8) with a cash payment of $237.91 set using the 30-year Treasury plus 110 bps;

• $1,106,308,000 of the $1.75 billion 3.75% notes due 2045 (Cusip: 594918BD5) with a cash payment of $251.94 set using the 30-year Treasury plus 110 bps;

• $1,568,040,000 of the $2.5 billion 4.1% notes due 2037 (Cusip: 594918BZ6) with a cash payment of $266.05 set using the 30-year Treasury plus 87 bps; and

• $324,503,000 of the $1 billion 4.2% notes due 2035 (Cusip: 594918BK9) with a cash payment of $278.89 set using the 30-year Treasury plus 75 bps.

The reference security for each series is the 2.375% Treasury due Nov. 15, 2049.

The cash payment percent of premium for each series is the percent of the amount by which the total exchange consideration exceeds $1,000 per $1,000 principal amount of pool one notes. The percentage for each series is 100%.

Holders who validly tendered pool one notes before the early exchange time will be eligible to receive a premium of $30 of new 2050 notes for each $1,000 principal amount of pool one notes validly tendered under the exchange.

Second pool

The four series of existing notes in the second pool are the following, listed in order of acceptance priority level with the amounts tendered as of the early exchange date and the total consideration per $1,000 principal amount:

• $672,725,000 of the $1 billion 4.75% notes due 2055 (Cusip: 594918BM5) with pricing set using the 30-year Treasury plus 125 bps and a 73% cash payment of the premium for $1,138.86 of new notes and a cash payment of $375.44;

• $1,492,344,000 of the $2.25 billion 4% notes due 2055 (Cusip: 594918BE3) with pricing set using the 30-year Treasury plus 125 bps and a 100% cash payment of the premium for $1,000 of new notes and a cash payment of $336.46;

• $992,305,000 of the $2 billion 4.5% notes due 2057 (Cusip: 594918CB8) with pricing set using the 30-year Treasury plus 125 bps and a 77% cash payment of the premium for $1,107.32 of new notes and a cash payment of $359.30; and

• $1,696,715,000 of the $2.25 billion 3.95% notes due 2056 (Cusip: 594918BU7) with pricing set using the 30-year Treasury plus 125 bps and a 100% cash payment of the premium for $1,000 of new notes and a cash payment of $333.83.

The reference security for the pool two notes is also the 2.375% Treasury due Nov. 15, 2049.

The issuer increased the cash payment portion of the premium from 70% for the 4.75% 2055 and 4.5% 2057 notes and from 90% for the 3.95% 2056 notes.

Holders who validly tendered pool two notes before the early exchange time are eligible to receive a premium of $30 principal amount of new 2060 notes for each $1,000 principal amount of pool two notes validly tendered under the exchange. That premium is reflected in the total considerations listed above.

New notes

The up to $6.25 billion of new 2.525% 30-year notes will mature June 1, 2050. Pricing was set using the 2.375% Treasury due Nov. 15, 2049 plus 125 bps.

The up to $3.75 billion of new 2.675% 40-year notes will mature June 1, 2060. Pricing was set using the 2.375% Treasury due Nov. 15, 2049 plus 140 bps.

The pricing time was 10 a.m. ET on May 14.

The exchange offers are subject to various conditions, including that the company issues at least $500 million of each series of new notes.

The joint dealer managers are BofA Securities (888 292-0070, 980 387-3907) and Deutsche Bank Securities Inc. (866 627-0391, 212 250-2955).

The exchange agent is D.F. King & Co., Inc. (212 269-5552, 800 431-9645, 212-269-5550, microsoft@dfking.com).

The computer software company is based in Redmond, Wash.

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