"Especially surprising considering they are paying only LIBOR + ~1% on most of their debt, a very low rate (1-mo LIBOR is currently 1/4 of 1%). Why would they dilute and sell so much of the stock to pay debt when they're paying so little for their credit? They also reduce their operating leverage".
According to Yahoo (which can be dangerous), UNFI has approx $296M in debt. Offering is for 3.85M shares. Assuming the offering is around 35 bucks less fees, UNFI will receive around $130M or LESS than half of its debt. Selling shares when the company's share price is relatively high makes sense. UNFI is only paying 1% + LIBOR for "most of their debt"??? In other words, "most" of UNFI's debt is revolving? Some day rates will go up; I have no problem with UNFI paying down some of its revolving credit--of course, the other route would be to sell some term debt to take advantage of the low rate environment. Apparently UNFI likes selling more shares at this level. Any long can step up and increase their holdings by 10% if they're concerned about dilution.
Assuming UNFI is only paying 1% plus LIBOR (seems cheap to me) for its REVOLVING CREDIT, UNFI obviously considered this and came to the conclusion that the share sale was the best course of action. If an investor or potential investor doesn't like how management is doing, they may want to sell their shares. Who knows what UNFI's longer term plans are, by selling shares at the current, relatively high level, UNFI improves its balance sheet and presumably allows them to take on more debt in the future if necessary.
Re MSFT, from what I read, a primary driver for its debt sale was that alot of its cash is abroad (and invested). To repatriate this cash would be costly from a tax angle.