Apple to sell record $17 billion in bonds

“Apple Inc. is selling $17 billion of bonds Tuesday, a record amount for a U.S. investment-grade corporate offering, according to investors familiar with the deal,” Katy Burne and Mike Cherney report for The Wall Street Journal. “The offering generated more than $50 billion in new orders, people familiar with the offering said.”

“The largest investment-grade bond deal previously sold in the U.S. was a $16.5 billion offering in February 2009 from Roche Holdings Inc.,” Burne and Cherney report. “The second largest was a $14.7 billion deal in November 2012 from AbbVie Inc., according to data provider Dealogic… The Apple offering comprises six chunks of debt, according to a regulatory filing from the company. Four chunks of fixed-rate debt are being offered maturing in three, five, 10 and 30 years. Apple is also selling two tranches of floating-rate debt, maturing in three and five years.

“The deal was expected to yield about 0.20 percentage point more than comparable Treasurys for the $1.5 billion in three-year fixed-rate bonds, down from expectations of 0.35 point earlier Tuesday; about 0.40 point on the $4 billion in five-year fixed bonds, down from 0.55; about 0.75 point on the $5.5 billion in 10-year bonds, down from 0.90-0.95; and 1 point on the $3 billion in 30-year bonds, down from guidance of 1.15-1.20, according to investors considering buying the deal,” Burne and Cherney report. “Apple is expected to sell billions of dollars in new bonds Tuesday. A customer uses a smart phone inside a store in San Francisco.”

Burne and Cherney report, “The $1 billion in three-year floating-rate notes and $2 billion in five-year floating-rate notes were expected to yield 0.05 percentage point and 0.25 percentage point, respectively, over the three-month London interbank offered rate, a benchmark for lending between banks. Earlier expectations for the yields on the floating debt were 0.20 point and 0.40 point over Libor.”

Read more in the full article here.

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  1. Pays to be long.

    “Apple made its intentions clear that this deal is for shareholder-friendly activity, but they have tremendous metrics and brand recognition,”

    1. I’ve spoken against Apple borrowing on this site and elsewhere, but now I see how they’re doing it, I can see that it’s a very clever tactic.

      They will be borrowing money at very low rates and when they buy their own stock, the saved dividend payments will be greater than the interest paid on the debt.

      On top of that, Apple still won’t have to repatriate it’s offshore money, so it’s a pretty clever arrangement.

      However having said that, I’d still prefer that Apple stayed debt free and didn’t play Wall Street’s games.

    2. They are not going into debt, it is called arbitrage. They can make more on their cash investments than the interest they will pay on the bonds. Brilliant plan. I read on Rueters that they have $50 billion in offers already. Now happy Ingotboutbat $450 and back in at $398. AAPL to $443 already today.

  2. So the CEO and board have transitioned Apple into a company more interested in making money by paper shuffling than by making products for the market. That is what I get from all this and it sounds like a Bozo alert should be sounded as the bean counters have ascended to the throne.

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