Apple Sells $14 Billion of Bonds

In its third time since April tapping the market, Apple is taking advantage of cheap borrowing costs to return more cash to shareholders.

Apple Inc. sold $14 billion of bonds to take advantage of cheap borrowing costs, tapping the market for a third time since May as it looks to return more cash to shareholders.

The company issued debt in six parts. The longest portion of the offering, a 40-year security, will yield 95 basis points (bps) above Treasuries, after initially discussing between 115 and 120 bps, according to a person with knowledge of the matter, who asked not to be identified as the details are private.

Until 2020, Apple hadn’t borrowed in the U.S. investment-grade market more than once in a calendar year since 2017. But rock-bottom interest rates proved too tempting for the world’s most valuable company to pass up as it pursues aggressive share buybacks and dividends.

Apple’s outstanding 40-year bonds, the 2.55 percent securities due 2060, widened more than 5 bps Monday, to trade around 89 bps over Treasuries, according to Trace. Bondholders typically sell out of their positions to make room for the new notes, which often come with a heftier yield to entice investors.

The average investment-grade company can borrow at a rate of 1.86 percent for about nine years, according to Bloomberg Barclays index data. That’s down from 1.94 percent when Apple was last in the market, in August.


What Bloomberg Intelligence says:

“Apple is returning to the bond market, even with $196 billion of cash on hand, which we believe suggests the pace of shareholder returns is likely to rise to new highs.”

—Robert Schiffman, senior credit analyst


The tech giant said it will use the proceeds for general corporate purposes, including buying back stock and paying dividends. It may also be used in funding for working capital, capital expenditures (capex), acquisitions, and repayment of debt, the person said.

Apple ended up borrowing more than the $10 billion that some, like research firm CreditSights, had predicted. The $14 billion raised is more cash than 93 percent of nonfinancial S&P 500 companies have on their balance sheet, according to the latest quarterly data compiled by Bloomberg.

After years of hoarding cash, Apple has been working to reduce its net cash position, largely through payouts to stockholders. Still, the company may need to expand its annual shareholder returns to more than $100 billion to reach its net-cash neutral target over the next few years, according to Bloomberg Intelligence.

Apple is coming off a quarter in which revenue topped $100 billion for the first time. Executives didn’t provide an official forecast in reporting earnings Wednesday, but warned that sales growth from AirPods and other wearables will decelerate in the current period.

Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley managed the bond sale, the person said.

–With assistance from Christopher DeReza and Tom Contiliano.

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