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On Monday, Apple Inc. joined numerous other borrowers in raising funds from the US blue-chip bond market, in anticipation of significant inflation readings later in the week.
Reportedly, the company headquartered in Cupertino, California, sold bonds worth $5.25 billion in a deal comprising five parts. The initial target was around $5 billion. The longest bond in the deal, with a maturity of 30 years, will yield 108 basis points over comparable Treasuries, which is lower than the previously discussed 135 basis points. The source requested anonymity since the talks are confidential.
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Corporate debt markets seem to be stabilizing, and dealers surveyed by media sources are anticipating US high-grade bond sales of $30 billion to $35 billion this week. As many as 11 companies are slated to issue fresh debt totaling $22.55 billion on Monday, securing financing before the release of the consumer price index on Wednesday, followed by the producer price index on Thursday. Additionally, T-Mobile US Inc. and Merck & Co. Inc. raised $3.5 billion and $6 billion in bonds, respectively.
As per the source, the funds raised from Apple’s bond sale will be utilized for various general corporate purposes such as stock repurchases, dividend payments, working capital, capital expenditures, acquisitions, and debt repayment. This marks Apple’s first bond sale since August when it raised $5.5 billion for the purpose of funding buybacks and dividends.
According to a note by Robert Schiffman, a senior credit analyst at Bloomberg Intelligence, Apple’s move to raise billions of dollars in new debt is more a result of its confidence in growing cash flow than operational requirements. He also stated that the five-part bond issuance is likely to support the company’s aim of achieving net-cash-neutrality.
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Before the deal was priced, Rob Waldner, the chief fixed income strategist and head of macro research at Invesco stated that the deal is likely to be highly popular with the market. He added that there has been considerable demand for high-quality fixed income. However, no comment has been provided by Apple.
Following the earnings report, Apple became the second large-cap tech issuer to sell bonds, with Facebook’s parent company, Meta Platforms Inc., raising $8.5 billion in its second-ever bond sale last week.
