Boston, MA 03/04/2014 (wallstreetpr) – Cisco Systems, Inc. (NASDAQ:CSCO) took advantage of low interest rates in the market to raise cheap debt through the sale of its bonds worth $8 billion. The proceeds from the bond offer will be used to finance share buybacks that the company plans to undertake. Cisco had in November said it planned to its increase its stock buyback program by $15 billion in the current fiscal year.
The bonds were offered in seven trenches of fixed and variable rate securities, the maturity of the bonds will be between 18 months and 10 years which will be the first offering in three years. Blue chip companies being led by Apple and Verizon have been accessing the debt market in a bid of bolstering their cash balances. Cisco Systems, Inc. (NASDAQ:CSCO) is currently facing cash deficiencies as 90% of its $47 billion is stacked in overseas countries, of which it can’t repatriate because of huge taxes it will be forced to pay.
Cisco bond benefit from increased demand
The demand for Cisco Systems, Inc. (NASDAQ:CSCO) offering was huge than earlier anticipated, surpassing supply by 2.5 times despite being offered on low premium terms .A 10 year debt for instance which was supposed to be expensive for the entire debt was priced at a coupon rate of 3.63%, 90 basis points ahead of current 10 year treasury rate.
Cisco Systems, Inc. (NASDAQ:CSCO) systems issued bonds with short term maturities at an interest rate of 2% which is quite low compared to the current market status. Part of the raised $8 billion will be used to repay a maturing $3.75 billion debt with the rest being used for stock repurchase. The market has been volatile in the recent months of which Cisco systems would wish to support its stock through buybacks. January alone saw the company purchase stock worth $4 billion thus being left with an additional $12 billion of authorized share repurchases.
Cisco Systems, Inc. (NASDAQ:CSCO) was down on Monday trading session by 1.06% to close the day at lows of $21.57
