Apple Sells $10 Billion of Bonds in Second Debt Deal Since July
Apple Plans First Bond Sale Since July to Add to War Chest
(Bloomberg) -- Apple Inc. sold $10 billion of notes in its first trip to the bond market in six months, becoming the second cash-rich technology company to sell debt this week despite prospects of a U.S. repatriation-tax holiday.
The iPhone-maker sold debt in nine parts. The longest portion was a $1 billion 4.25 percent coupon 30-year bond, according to data compiled by Bloomberg. Apple will use proceeds for general corporate purposes, which can include share buybacks and capital spending. Microsoft Corp. sold $17 billion of bonds earlier in the week, capping the busiest month for U.S. investment-grade corporate issuance ever.
Apple has become a bond market regular in recent years, selling debt at least annually since 2013. Though its debt load has grown, its $246 billion cash pile means the company can maintain credit ratings that are just one step below the top grade.
“They have great earnings, and then they issue debt,” said Tom Murphy, a money manager at Columbia Threadneedle. “They commit to having a net cash position, so it’s hard to get too worked up.”
Investor demand allowed Apple to lower the price it was paying on the notes across all maturities. The 30-year bond yields 1.15 percentage points more than Treasuries with similar maturities, according to a person familiar with the matter, who asked not to be named because the deal is private. That’s down from initial discussions of around 1.4 percentage points. Goldman Sachs Group Inc., Deutsche Bank AG and JPMorgan Chase & Co. managed the sale.
Overseas Holdings
Ninety-four percent of Apple’s cash stockpile was held overseas at the end of last year, filings show. To bring back the money under current laws, the Cupertino, California-based company could have to pay a tax rate of 35 percent, a tough sell when it can pay interest rates of less than 5 percent on new bonds. It raised about $24 billion in 2016 for programs such as share buybacks.
Analysts have said that optimism around a potential repatriation tax holiday following President Donald Trump’s election could cause some of the biggest cash hoarders to hold off on issuing new debt. But with Congress yet to introduce legislation, companies are once again turning to the bond market, where rates remain near historic lows.
Moody’s Investors Service rated the new Apple bonds Aa1, the second-highest rating. S&P Global Ratings gave the notes an equivalent AA+ grade.
--With assistance from Rick Green Lisa Loray and Brian Smith
To contact the reporter on this story: Claire Boston in New York at cboston6@bloomberg.net.
To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Rick Green