Apple takes on $8.5 billion in new debt

Apple on Monday took on $8.5 billion in new debt with a four-part bond deal, adding its name to the roster of U.S. investment-grade companies borrowing a record amount of debt in the corporate bond market during the pandemic.

U.S. moneyJoy Wiltermuth for MarketWatch:

Apple Inc. makes borrowing during a pandemic look as easy as pie. The Apple debt deal stirred up significant interest for a series of bonds that mature in three, five, 10 and 30 years.

“It’s a nice reminder that even in this uncertain market, that investment-grade companies have access to capital,” said Tom Murphy, head of investment-grade corporate credit team at Columbia Threadneedle Investments, in an interview with MarketWatch. “So many companies would love to be in their situation from a capital perspective,” he said of Apple and its significant cash pile and cheap access to debt.

Apple, which had a massive $190 billion cash hoard as of its first-quarter earnings last week, indicated that the new debt will be used for a variety of general corporate purposes, including paying dividends, stock repurchases, debt repayment and working capital.

Apple has $8 billion of debt coming due in 2020, mainly borrowed in the U.S. and Japanese debt markets, according to analysts at CreditSights. “They may be setting themselves up to pay that back,” Murphy said.

Bill Maurer for Seeking Alpha:

In total, Apple was able to borrow $8.5 billion this time around, compared to $7 billion in September 2019. Despite the larger offering, total annual interest on this week’s deal was just over $135 million, compared to more than $154 million in last year’s deal. That nearly $19 million less in interest means that the weighted average coupon this time around was 1.59%, more than 60 basis points below the 2.20% seen last year.

Management still has a long way to go to get to its cash-neutral balance sheet target. Over $90 billion has been spent on capital returns in the last four quarters, yet the net cash balance is only down by $30 billion. That shows how great Apple’s cash flow production is.

In the end, Apple got a tremendous deal with its latest bond offering. Despite raising an extra billion and a half dollars, more than 21% more than last year’s offering, the company is paying 12.2% less in annual interest on a dollar basis. Whether it be for refinancing of previous debts or to help with the capital return plan, investors should be thrilled that the technology giant was able to use its financial might to its advantage yet again.

MacDailyNews Take: Free money.


  1. This is an interesting article on Apple’s stock repurchasing:

    I’m not a huge fan of stock buybacks because I don’t understand it all that well. I keep thinking acquisitions would excite investors more and help boost revenue and profits. I only think stock buybacks are good because it means Apple only has to give dividends for a lesser number of outstanding shares. I’m not entirely happy about Apple taking on more debt, but I’m no financial genius so I just have to trust Apple to take the proper path.

    1. As MDN pointed out in a previous post about this article, the journalist shows no imagination for the future of Apple. Apple is buying back shares precisely because they know the future value of today’s share price is undervalued. Not only do they know today’s price is lower than it should be but they are also betting on themselves for the future. Is it confidence or exuberance – time will tell – but they have given us no reason to disagree with them thus far.

    2. I believe taking on debt actually is more profitable for them. The interest rate on the borrowed money is less than the interest they get from letting $ sit in the bank.

    3. Apple does very well, but they can do better, and they do listen sometimes (laptop keyboard switchback or just start building better iPads two years ago, which led to selling more iPads again).

      The SE iPhone is going to be a big hit again (don’t listen to the Geeks or WS), now if only they can just build that half sized Mac Pro tower with a Apple CPU, a 2500 dollar curated XDR display and a new Apple router. 🙂

      They can do even better and that is why I’m long…Apple

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