Apple, along with peers Oracle and Microsoft, has not tapped the bond market since new US tax laws took effect at the beginning of last year, allowing companies to repatriate overseas earnings at a lower cost.
Thursday 05, September 2019
Apple is borrowing $7 billion in its first bond sale in nearly two years, as cheap borrowing costs tempt even companies flush with cash, reported Bloomberg.
The tech giant, which has more than $200 billion in cash and securities on its books, is selling senior unsecured bonds in five parts. The longest portion of the offering, a $1.5 billion 30-year security, will yield 1.03 percentage points above Treasuries, after an initially discussed spread of about 1.25 percentage points.
It’s been tapping that source of cash to fund capital returns in the meantime, an activity it had typically relied on investors for. The company last sold bonds in November 2017, in a $7 billion debt offering.
With a rally in Treasuries pushing the average investment-grade bond yield to just 2.79 per cent, companies are getting in while the getting is good.
Apple has been aiming for a net-cash-neutral position, but its cash still exceeds debt by around $100 billion. In April, it increased its share repurchase programme to $175 billion from $100 billion, of which $78.2 billion had been used by the end of June.
Proceeds from the bond sale could be used to buy back shares as well as for acquisitions and debt repayment, among other uses.
Bank of America, Deutsche Bank and Goldman Sachs Group are managing Apple’s bond sale.