“Investors in Apple’s record U.S. $17 billion bond deal have suffered some of the biggest losses in recent investment-grade new issues, with about $760 million wiped off the value of longer-maturing Apple securities that they bought just weeks ago,” Danielle Robinson reports for Reuters.
“The prices of the Apple $5.5 billion 2.4 percent 10-year and the $3 billion 3.85 percent 30-year bonds have plunged so much since the deal priced on April 30 that it would take about three years of earned interest from the coupons for investors to cover their losses,” Robinson reports. “‘Basically if you own this paper, you’re sitting on it for three years or selling at a loss,’ said Rajeev Sharma, senior portfolio manager at First Investors Management, who bailed out of his position in the 10-year at a loss some weeks ago… ‘This deal is great for shareholders because of the tight coupons Apple locked in to pay for dividends and share buybacks, but everyone who didn’t hedge out rate risk – the Moms and Pops who have money in total-return funds – are looking at dollar losses that will suck up a lot of coupon payments,’ said one senior manager of a bond syndicate desk who was not involved in underwriting the deal.”
Robinson reports, “Apple attracted a record 2,000 orders worth $50.2 billion from 900 investors when it made its debut in the bond markets in late April, when the 10-year Treasury rate was 1.67 percent versus 2.4 percent today. ‘This is not Apple’s fault,’ said the senior manager. ‘It’s a fantastic credit. This deal could not have been better timed or executed in terms of pricing. And in terms of credit spreads, it’s widened out – but not by as much as many other names in its sector.'”
Read more in the full article here.
MacDailyNews Take: Color Apple bondholders iBond blue™.
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