Apple saw strong demand for for its new $14 billion debt deal on Monday, attracting more than $33 billion worth of orders. Goldman Sachs, J.P. Morgan Securities, and Morgan Stanley underwrote Apple’s latest debt offering.
Joy Wiltermuth for MarketWatch:
The six-tranche Apple AAPL, +1.65% debt deal included mostly bonds rated Aa1 and AA+ that mature in five to 40 years. The largest $3 billion slug of 30-year debt cleared at a spread of 82 basis points above Treasurys TMUBMUSD30Y, 1.888%, according to pricing details viewed by MarketWatch.
The Apple deal also marked the biggest U.S. investment-grade corporate bond to be issued so far in 2021, topping 7-Eleven’s nearly $11 bond offering last week, according to one bond investor.
Its debt deal followed on the heels of Apple posting its highest quarterly revenue ever last week, with the new iPhone 12 helping power the company to its first $100-billion quarter in sales.
Apple’s new set of bonds were denominated in U.S. dollars, which the company noted partially could be used to buy back stock and fund dividend payments, in its prospectus.
Apple reported last week that it recently returned more than $30 billion to shareholders, including $3.6 billion in dividends and equivalents and $24 billion through the repurchases of 200 million Apple shares.
MacDailyNews Take: More buybacks and a modest dividend increase are coming later this spring.
Waste, never take on debt if you don’t have to, applies to individuals as well companies. Hint those that didn’t seem to get further ahead.
I believe that the adage is to not take on more debt than you can afford to … Money in the bank gets (minimal) interest and gets taxed. Debt payments offset income and gives you a tax benefit. It makes sense for strong cash flow companies (like Apple) to offer bonds (which are a liability), and use the proceeds to reduce shares (and thereby dividends that would be paid on those shares).
As an individual, I would never borrow if I didn’t actually need it, even if interest rates were low. I’m always looking to remove personal debt as I don’t feel comfortable having any and I don’t. Maybe I’m just stupid in terms of finance as Apple certainly should have better knowledge in handling finance than I do. I wonder when Apple will decide to stop collecting debt or if they have some sort of goal in mind. I sure wish I could grasp Apple’s long-term strategy.
One word for it is “debt”. Another word is “leverage”. In Apple’s case, it’s strategic leverage. The philosopher George Carlin once remarked that the way to get a loan is prove to the bank that you don’t need the money. (And if it wasn’t Carlin, it was someone equally perceptive.) Apple doesn’t need to take on any debt. None. But why spend your own cash if you can spend someone else’s? If something should go wrong, Apple could, at any moment, retire 100% of its debt by writing a check or two. And the people lending their money to Apple are pretty much guaranteed its return with a small profit. Apple is a very safe place to put money you can’t afford to lose. (The stock is also safer than most people realize, but it does carry greater risk.)
I can’t stop Apple from taking on more debt, but I would prefer to see Apple acquire more video content or increase dividends with that bond money than simply buying back millions of shares every single quarter. I might be wrong, but I think big investors are getting bored with Apple just buying back shares. Maybe some large acquisition would get big investors more excited about investing in the company. I’d like to see Apple mix it up a bit, that’s all.