Microsoft in $1.25bn note issue

Microsoft plans to raise up to $1.25bn (£850m) by offering three- year convertible senior notes to institutional investors.

The tech firm said each note can be converted into 29.9 shares of common stock.

The zero coupon convertible notes, which will mature in 2013, will not bear interest and the principal amount will not accrete, the company said.

The initial conversion price for the notes will be $33.40 per share, which is a 33 per cent premium based on the last reported sale price of Microsoft’s common stock earlier this week of $25.11.

It has repurchased shares of its common stock concurrently with the pricing of the convertible notes in privately negotiated transactions, it said.

The company said it will use the net proceeds from the offering of convertible notes to repay short term debt.

It said it may repurchase shares from time to time in open market transactions following the pricing of the convertible notes.

Microsoft’s stock has fallen 17 per cent this year.