Cisco Systems Inc. raises 8 billion dollars in bond sale to finance stock buybacks

Cisco Systems Inc. managed to raise 8 billion dollars through the worlds largest bond sale in 2014 that was made in order to help the company finance its stock buybacks after shares decreased by almost 6% in a period of six months.

According to data compiled by Bloomberg, Cisco issued debt in seven parts with fixed- and floating-rate securities in the largest offering of investment-grade bonds in the U.S. after a record 49 billion dollars were issued by Verizon Communications Inc. in September 2013.

Cisco System Inc. posted a forecast that its fiscal third-quarter revenue is possible to miss some analysts estimates due to weakening emerging markets and decreasing telecommunications-service providers demand. About 4 billion dollars of stock was repurchased by Cisco Systems Inc. in the three months through January 25th. However, the companys shares delivered losses to its investors in the same period. At the same time, Standard and Poors 500 Information Technology Index advanced by almost 7%.

Thomas Chow, a money manager who is currently working for Delaware Investments, said in an interview, which was cited by Bloomberg: “Theres just been overwhelming demand in the front-end for well-known issuers with strong fundamentals. Though Cisco itself hasnt had smooth sailing from the equity perspective, the bond maker is willing to take on that risk. It has a large cash balance and a dominant position in product lines that arent going to disappear overnight.”

Cisco Systems Inc., which is currently the largest network routers and switches manufacturer in the world, made a regulatory filing today, saying that the raised money may be used by the company in order to pay back 3.75 billion dollars of notes maturing this year, as well as to restore capital to its shareholders.

According to data compiled by Bloomberg, 2.35 billion dollars of floating-rate securities were issued by the company and split between maturities of 18 months, three years and five years. In addition, 1.1% notes due in 2017, which were estimated to 2.4 billion dollars were sold by Cisco. The company also sold 1.75 billion dollars of 2.125% five-year bonds, 500 million dollars of 2.9% securities due in 2021 and 1 billion dollars of 3.625%, 10-year debt.

Cisco Systems Inc. fell by 0.05% on Monday to settle the session at $22.12, marking a one-year change of +5.84%. According to CNN Money, the 34 analysts offering 12-month price forecasts for Cisco Systems Inc. have a median target of $24.25, with a high estimate of $29.00 and a low estimate of $16.00. The median estimate represents a +9.63% increase from the last price close.