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Yahoo shares up on debt financing, buyback plans

The Associated Press

Yahoo Inc. shares jumped Wednesday on the company's plans to sell $1 billion in senior notes and increase its stock buyback authorization by $5 billion.

Investors welcomed the news, sending shares up more than 4 percent to $36.10 by early afternoon.

Yahoo said late Tuesday that it plans to sell the convertible senior notes in a private placement and will use the money to buy back shares and for other purposes. The notes mature in 2018 and are convertible into cash, shares of Yahoo's common stock or a combination of both.

The increase in buyback authority brings Yahoo's total authorization to $5.3 billion. The Sunnyvale, Calif. company spent $3.1 billion buying back 123 million shares in the first nine months of this year. Companies often buy back stock in an effort to boost the value of their remaining shares.

Citi analyst Mark May said the announcement was not a big surprise as he had expected it to actively repurchase shares and it only had $300 million remaining under its prior authorization. Additionally, debt financing remains cheap and the company ended its most recent quarter with $3.2 billion in cash, not much above the minimum that the company's management prefers to keep on hand. He reiterated a "Buy" rating on the stock.