Microsoft announces pricing terms for its exchange offers and increases New 2060 Notes Issue Cap

Microsoft Corp. (NASDAQ: MSFT) (“Microsoft”) announced today the pricing terms with respect to its offers to (i) exchange (the “Pool 1 Offer”) the ten series of notes described in the table below (collectively, the “Pool 1 Notes”) for a new series of Microsoft’s 2.525% notes due June 1, 2050 (the “New 2050 Notes”) and a cash payment, as applicable. For each $1,000 principal amount of Pool 1 Notes validly tendered and not validly withdrawn prior to 11:59 p.m., New York City time, on May 28, 2020 (the “Expiration Time”) and accepted by Microsoft, the following table sets forth the yield, the total exchange consideration, the principal amount of the New 2050 Notes and the amount of the cash payment, as applicable:

Pool 1 Table(1)
Title of

Security

CUSIP

Number

Acceptance Priority LevelReference

UST Security(2)

Fixed

Spread

(basis

points)

Yield(3)Early

Exchange

Premium(4)

Total

Exchange

Consideration(4)(5)

Principal

Amount

of New

Notes(6)

Cash Payment(4)
4.875% Notes due 2043594918AX2130-year+1102.375%$30$1,441.62$1,000.00$441.62
5.300% Notes due 2041594918AM6230-year+1052.325%$30$1,486.31$1,000.00$486.31
4.450% Notes due 2045594918BL7330-year+1102.375%$30$1,388.59$1,000.00$388.59
4.250% Notes due 2047594918CA0430-year+1102.375%$30$1,363.95$1,000.00$363.95
5.200% Notes due 2039594918AD6530-year+952.225%$30$1,458.92$1,000.00$458.92
4.500% Notes due 2040594918AJ3630-year+1002.275%$30$1,360.57$1,000.00$360.57
3.750% Notes due 2043594918AU8730-year+1102.375%$30$1,237.91$1,000.00$237.91
3.750% Notes due 2045594918BD5830-year+1102.375%$30$1,251.94$1,000.00$251.94
4.100% Notes due 2037594918BZ6930-year+872.145%$30$1,266.05$1,000.00$266.05
4.200% Notes due 2035594918BK91030-year+752.025%$30$1,278.89$1,000.00$278.89
  1. The figures in this table assume a settlement date of June 1, 2020.
  2. The “30-year Reference UST Security” refers to the 2.375% U.S. Treasury Notes due November 15, 2049.
  3. Reflects the bid-side yield of the 30-year Reference UST Security as of the pricing time of 1.275% plus the applicable Fixed Spread, calculated in accordance with the procedures set forth in the Prospectus.
  4. Per $1,000 principal amount of Pool 1 Notes.
  5. Holders who validly tender Pool 1 Notes after 5:00 p.m., New York City time, on May 13, 2020 (the “Early Exchange Time”) will not be eligible to receive the Early Exchange Premium of $30 principal amount of the New 2050 Notes for each $1,000 principal amount of Pool 1 Notes validly tendered and not withdrawn. For the avoidance of doubt, the $30 per $1,000 Early Exchange Premium is included within the total exchange consideration and is not in addition to the total exchange c
  6. Does not reflect any accrued and unpaid interest. The Company will pay accrued and unpaid interest on the Existing Notes up to, but not including, the settlement date.

and (ii) exchange (the “Pool 2 Offer” and, together with the Pool 1 Offer, the “Exchange Offers”) the four series of notes described in the table below (collectively, the “Pool 2 Notes” and, together with the Pool 1 Notes, the “Existing Notes”) for a new series of Microsoft 2.675% notes due June 1, 2060 (the “New 2060 Notes” and, together with the New 2050 Notes, the “New Notes”) and a cash payment, as applicable. For each $1,000 principal amount of Pool 2 Notes validly tendered and not validly withdrawn prior to the Expiration Time and accepted by Microsoft, the following table sets forth the yield, the total exchange consideration, the principal amount of the New 2060 Notes and the amount of the cash payment, as applicable:

Pool 2 Table(1)
Title of

Security

CUSIP

Number

Acceptance Priority LevelReference

UST Security(2)

Fixed

Spread

(basis

points)

Yield(3)Early

Exchange

Premium(4)

Total

Exchange

Consideration(4)(5)

Principal

Amount

of New

Notes(6)

Cash Payment(4)
4.750% Notes due 2055594918BM5130-year+1252.525%$30$1,514.30$1,138.86$375.44
4.000% Notes due 2055594918BE3230-year+1252.525%$30$1,336.46$1,000.00$336.46
4.500% Notes due 2057594918CB8330-year+1252.525%$30$1,466.62$1,107.32$359.30
3.950% Notes due 2056594918BU7430-year+1252.525%$30$1,333.83$1,000.00$333.83
  1. The figures in this table reflect any optional adjustments of the total exchange consideration as permitted under the terms and conditions in the Prospectus forming part of the Registration Statement and assume a settlement date of June 1, 2020.
  2. The “30-year Reference UST Security” refers to the 2.375% U.S. Treasury Notes due November 15, 2049.
  3. Reflects the buy-side yield of the 30-year Reference UST Security as of the pricing time of 1.275% plus the applicable Fixed Spread, calculated in accordance with the procedures set forth in the Prospectus.
  4. Per $1,000 principal amount of Pool 2 Notes.
  5. Holders who validly tender Pool 2 Notes after the Early Exchange Time will not be eligible to receive the Early Exchange Premium of $30 principal amount of the New 2060 Notes for each $1,000 principal amount of Pool 2 Notes validly tendered and not withdrawn. For the avoidance of doubt, the $30 per $1,000 Early Exchange Premium is included within the total exchange consideration and is not in addition to the total exchange c
  6. Does not reflect any accrued and unpaid interest. The Company will pay accrued and unpaid interest on the Existing Notes up to, but not including, the settlement date.

The aggregate principal amount of Pool 1 Notes and Pool 2 Notes of each series that are accepted for exchange will be based on the order of acceptance priority for such series, as applicable, as set forth in the tables above, up to $6,250,000,000 aggregate principal amount (the “New 2050 Notes Issue Cap”) and up to $3,750,000,000 aggregate principal amount (the “New 2060 Notes Issue Cap,” increased from $3,000,000,000), respectively. Holders who validly tender the Existing Notes after the Early Exchange Time but on or before the Expiration Time will only be eligible to receive the Exchange Consideration, which equals the Total Exchange Consideration minus the Early Exchange Premium as detailed in the tables above.

As permitted under the terms and conditions in the Registration Statement (as defined below), the Company has elected to increase the Cash Payment Percent of Premium on the 4.750% Notes due 2055 from 70% to 73%, the 4.500% Notes due 2057 from 70% to 77%, and the 3.950% Notes due 2056 from 90% to 100%. These changes are reflected in the Cash Payment amounts shown in the tables above.

In addition to the principal amount of New Notes and applicable cash payment specified in the tables above, holders with Existing Notes that are accepted for exchange will receive a cash payment representing (i) all or a portion of the accrued and unpaid interest to, but not including, the settlement date, and (ii) amounts due in lieu of any fractional amounts of New Notes, in each case, as described in the Prospectus.

A Registration Statement on Form S-4, including a prospectus (the “Prospectus”), which is subject to change, relating to the New Notes has been filed with the Securities and Exchange Commission (the “SEC”) on April 30, 2020 (the “Registration Statement”) but has not yet become effective. The New Notes may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. If and when issued, the New Notes will be registered under the Securities Act of 1933, as amended. This news release does not constitute an offer or a solicitation by Microsoft of an offer to buy, nor shall there be any sale of securities in any state in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

Consummation of the Exchange Offers is subject to a number of conditions as set forth in the Prospectus included in the Registration Statement, including, among other things, the Registration Statement of which the Prospectus forms a part having been declared effective by the SEC and remaining effective on the settlement date.

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