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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times technology reporter Matt Day.

February 12, 2015 at 6:00 AM

Minority-owned firms handled 4% of Microsoft’s record bond sale

The Rev. Jesse Jackson, on a campaign to spotlight the lack of diversity in the technology industry, praised Microsoft this week after the company included minority-owned banks its largest-ever bond sale.

“Microsoft is making a major statement,” Jackson said on Monday after Microsoft raised its heap of cash.

How much of that cash did Microsoft put behind its statement? The company told us in a securities filing Wednesday.

Microsoft included four minority-owned firms — CastleOak Securities, Samuel A. Ramirez & Co., Williams Capital Group and Loop Capital Markets — among the 14 banks and brokers charged with selling its bonds. The four together sold $422 million, or just under 4 percent, of the $10.75 billion in bonds Microsoft ended up selling on Monday.

A woman-owned firm, Lebenthal & Co., and Drexel Hamilton, owned by disabled veterans, each handled 1 percent of the sale.

Taken together, 6 percent of Microsoft’s bond sale was steered toward minority- and women-owned banks, a record in the company’s seven major long-term debt sales.

But make no mistake, this show was run by Wall Street’s heavyweights.

Barclays, the British banking giant, and Citigroup each handled 24.5 percent of Microsoft’s sale. Six other major banks were each allocated 7.5 percent.

Why didn’t Microsoft, which makes a point of promoting diversity among its suppliers, send more of its business toward minority-owned firms?

First, some background on how companies like Microsoft borrow.

Companies typically don’t have the contacts or expertise to quickly find enough investors to loan them billions of dollars, so they turn to middlemen: banks.

Banks called in to help sell bonds tap their network of clients — retirement funds, investment managers, other banks, and the like — to create as much demand for the bonds as possible. Higher demand translates to lower interest rates for the company.

The banks are paid for their trouble in so-called underwriting fees, as well as the right to buy a portion of the newly issued debt at a discount.

High finance is an industry that tends to be about as white and male as big tech. There aren’t a ton of minority-owned firms, and certainly few that have the reach of Wall Street’s giants. If Microsoft’s leaders want to borrow cheaply, there’s not an easy way to avoid the big guys.

Microsoft, Jackson says, should get credit for spreading the cash around a bit.

“We are delighted that they are participating in Microsoft’s debt offering,” Jackson said of the minority-owned firms. “They are changing the flow of the river.”

Comments | More in Financial | Topics: bonds, diversity, microsoft


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