FT on Microsoft Sec Lending
The Financial Times writes, "Microsoft shows how corporate cash piles blur lines with Wall St." The article tells us, "At first glance, Microsoft seems exceptionally cautious with its balance sheet. About 84 per cent of its $133bn in cash is invested in US government and agency securities, the greatest share of its peer group. But company filings and public documents show that one of the world's largest technology companies doesn't just dump its excess cash into bonds and leave it there. It has taken an approach to the $14tn Treasury market that is more akin to that of professional money managers. Beyond the risk of Microsoft facing losses on its bond holdings in the event of a sharp rise in yields, the company's portfolio of short-term secured lending has grown notably over the past year, according to SEC filings). In this type of lending, an entity with large amounts of cash or securities, such as bonds or stocks, on their balance sheets lend them out in an effort to generate income. In return, they accept safe assets like cash or government securities as collateral. Of the 30 US companies the FT analysed with large amounts of cash on their balance sheet, Microsoft had by far the fastest growth in this type of lending in the 12 months to June 30. The only other company with a sizeable increase in short-term lending was chipmaker Intel Corp, and its collateral value rose about 2.6 times over. Microsoft's surged twelvefold. The expansion in Microsoft's short-term secured lending underscores its unusual role in the Treasury market. It also points to how the need of American companies to manage their large cash piles accumulated overseas -- and which they are reluctant to repatriate for tax reasons -- is blurring the distinction between activities on Wall Street and in non-financial companies."
