Microsoft -- Financial Engineering Cynicism

Microsoft (MSFT) announced some financial engineering with a convertible debenture issue. Interest rate to be negotiated at closing. Due in 2013 which is just around the corner, Microsoft says it will buy up enough shares to prevent dilution if as and when. Proceeds to repay existing debt.

Microsoft has a “AAA” rating which was just recently affirmed by S&P. Do we believe them?

Why the short term? The deal has more financial engineering than anything else. Microsoft is saying we are strong enough to bet against our shareholders, except the debenture owners of this particular issue. So do a few select institutions have a guaranteed ride? Must be nice.

If you believe interest rates are rising why not borrow long at a fixed rate and leverage the growing spreads. Perhaps that is the next deal?

Disclosure: No position in any stocks mentioned in this post.