Microsoft prices offers to exchange 18 note series, ups new notes cap

By Rebecca Melvin

New York, March 2 – Microsoft Corp. announced the pricing terms for its offer to exchange 14 series of existing notes for new 2.921% notes due March 17, 2052 and cash and its offer to exchange four series of existing notes for a new series of 3.041% notes due March 17, 2062 and cash, according to a news release.

Microsoft also increased the maximum amount of new 2062 notes it will issue in exchange for existing notes to $2 billion from $1.25 billion. The cap on the new 2052 notes remains at $6.25 billion.

As previously reported, as of the early exchange date of 5 p.m. ET on March 1, holders had tendered $6,993,603,000 of notes from 14 series bundled into pool 1 and $1,927,568,000 of notes from four series in pool 2.

The exchange offers will expire at 11:59 p.m. ET on March 15. The settlement date is expected to be March 17.

Pool 1 offer

For each $1,000 principal amount of pool 1 notes validly tendered and not validly withdrawn by the expiration time, holders will receive $1,000 principal amount of new 2052 notes and a cash payment.

Holders of

• The 4.875% notes due 2043 (Cusip: 594918AX2) will receive a total consideration of $1,367.81 including a $367.81 cash payment, with pricing set using the 30-year Treasury plus 45 basis points;

• The 4.45% notes due 2045 (Cusip: 594918BL7) will receive $1,304.37 including a $304.37 cash payment, with pricing set using the 30-year Treasury plus 50 bps;

• The 4.25% notes due 2047 (Cusip: 594918CA0) will receive $1,268.30 including a $268.30 cash payment, with pricing to be set using the 30-year Treausry plus 55 bps;

• The 5.3% notes due 2041 (Cusip: 594918AM6) will receive $1,432.59 including a $432.59 cash payment, with pricing set using the 30-year Treasury plus 30 bps;

• The 5.2% notes due 2039 (Cusip: 594918AD6) will receive $1,407.16 including a $407.16 cash payment, with pricing set using the 30-year Treasury plus 20 bps;

• The 4.5% notes due 2040 (Cusip: 594918AJ3) will be exchanged for $1,312.94 including a $312.94 cash payment, with pricing to be set using the 30-year Treasury plus 25 bps;

• The 3.7% notes due 2046 (Cusip: 594918BT0) will be exchanged for $1,172.18 including a $172.18 cash payment, with pricing to be set using the 30-year Treasury plus 52 bps;

• The 3.75% notes due 2043 (Cusip: 594918AU8) will be exchanged for $1,176.34 including a $176.34 cash payment, with pricing set using the 30-year Treasury plus 45 bps;

• The 3.75% notes due 2045 (Cusip: 594918BD5) will be exchanged for $1,186.84 including a $186.84 cash payment, with pricing set using the 30-year Treasury plus 45 bps;

• The 3.5% notes due 2042 (Cusip: 594918AR5) will be exchanged for $1,153,54 including a $153.54 cash payment, with pricing set using the 30-year Treasury plus 35 bps;

• The 4.1% notes due 2037 (Cusip: 594918BZ6) will be exchanged for $1,236.37 including a $236.37 cash payment, with pricing set using the 30-year Treasury plus 5 bps;

• The 4.2% notes due 2035 (Cusip: 594918BK9) will be exchanged for $1,252.63 including a $252.63 cash payment, with pricing set using the 30-year Treasury minus 10 bps;

• The 3.45% notes due 2036 (Cusip: 594918BS2) will be exchanged for $1,164.75 including a $164.75 cash payment, with pricing set using the 30-year Treasury minus 7 bps; and

• The 3.5% notes due 2035 (Cusip: 594918BC7) will be exchanged for $1,166.48 including a $166.48 cash payment, with pricing set using the 30-year Treasury minus 15 bps.

The reference security for each series is the 1.625% Treasury due Nov. 15, 2050.

The principal amount of pool 1 notes of each series that are accepted for exchange is based on the order of acceptance priority for such series, such that the total principal amount of pool 1 notes accepted in the offer results in the issuance of new 2052 notes in an amount not exceeding $6.25 billion.

The total consideration includes the $30 early exchange premium for notes tendered by the early exchange time.

As announced earlier in the day on Tuesday, Microsoft received tenders for the following pool 1 notes as of the early deadline:

• $28,429,000 of the $174,572,000 4.875% notes due 2043;

• $292,925,000 of the $1,288,337,000 4.45% notes due 2045;

• $495,777,000 of the $1,584,630,000 4.25% notes due 2047;

• $52,256,000 of the $770,339,000 5.3% notes due 2041;

• $37,963,000 of the $558,545,000 5.2% notes due 2039;

• $85,290,000 of the $571,171,000 4.5% notes due 2040;

• $2,743,621,000 of the $4.5 million 3.7% notes due 2046;

• $75,863,000 of the $244,015,000 3.75% notes due 2043;

• $141,878,000 of the $640,567,000 3.75% notes due 2045;

• $445,873,000 of the $900 million 3.5% notes due 2042;

• $1,062,832,000 of the $1,916,467,000 4.1% notes due 2037;

• $275,906,000 of the $1 billion 4.2% notes due 2035;

• $952,795,000 of the $2.25 million 3.45% notes due 2036; and

• $302,195,000 of the $1.5 million 3.5% notes due 2035.

Pool 2 offer

The aggregate principal amount of pool 2 notes of each series accepted for exchange is based on the order of acceptance priority for such series, such that the principal amount of pool 2 notes accepted in the offer results in the issuance of new 2062 notes in an amount not exceeding $2 billion, increased from $1.25 billion.

For every $1,000 principal amount of notes, listed in order of acceptance priority level,

• The 3.95% notes due 2056 (Cusip: 594918BU7) will be exchanged for $1,231.73 including a $231.73 cash payment, with pricing set using the 30-year Treasury plus 67 bps and an 88% cash payment of the premium;

• The 4.75% notes due 2055 (Cusip: 594918BM5) will be exchanged for $1,401.56 including a $385.50 cash payment, with pricing set using the 30-year Treasury plus 67 bps and a 72% cash payment of the premium;

• The 4.5% notes due 2057 (Cusip: 594918CB8) will be exchanged for $1,354.97 including a $354.97 cash payment, with pricing set using the 30-year Treasury plus 67 bps and a 72% cash payment of the premium; and

• The 4% notes due 2055 (Cusip: 594918BE3) will be exchanged for $1,236.52 including a $236.52 cash payment, with pricing to be set using the 30-year Treasury plus 67 bps and a 94% cash payment of the premium.

The reference security for the pool 2 notes is also the 1.625% Treasury due Nov. 15, 2050.

Holders who tendered pool 2 notes before the early exchange time are eligible to receive a premium of $30 principal amount of new 2062 notes for each $1,000 principal amount of pool 2 notes validly tendered under the exchange. The premium is included in the total consideration.

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 1 notes.

As permitted under the terms and conditions of the offer, Microsoft elected to increase the cash payment percent of premium on the 3.95% notes due 2056 to 100% from 88%, on the 4.75% notes due 2055 to 96% from 72%, on the 4.5% notes due 2057 to 100% from 72% and on the 4.0% notes due 2055 to 100% from 94%. These changes are reflected in the cash payment amounts.

As announced earlier in the day on Tuesday, holders had tendered the following pool 2 notes as of the early exchange time:

• $1,513,090,000 of the $1,954,510 3.95% notes due 2056;

• $31,494,000 of the $326,735,000 4.75% notes due 2055;

• $129,655,000 of the $883,777,000 4.5% notes due 2057; and

• $253,329,000 of the $793,850,000 4% notes due 2055.

For exchange offer, in addition to the principal amount of new notes and applicable cash payment, holders of existing notes under that are accepted for exchange will receive a cash payment representing all or a portion of the accrued and unpaid interest to, but not including, the settlement date, and amounts due in lieu of any fractional amounts of new notes.

As previously reported, the exchange offers are conditioned on Microsoft issuing at least $3 billion of new 2052 notes and $750 million of new 2062 notes in exchange for the existing notes.

The joint dealer managers are Morgan Stanley (800 624-1808 or 212 761-1057) and Wells Fargo Securities (866 309-6316 or 704 410-4756).

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

The computer software company is based in Redmond, Wash.

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