Apple clinched $10bn of debt financing on Thursday in the fourth bond sale worth at least that much globally this year, as a rebound in the iPhone maker’s sales stirred up strong investor demand.
The US technology group will use the proceeds from the sale for share buybacks and to fund dividends, as well as for general corporate purposes.
US companies have issued a huge amount of debt since the turn of the decade, with more than $1tn borrowed each year since 2010. Many companies, including several in the technology sector, have turned to debt markets to finance shareholder returns in an attempt to avoid the tax hit of repatriating cash generated abroad. Apple is flush with cash held overseas.
Goldman Sachs analysts forecast in January that S&P 500 groups would repatriate $200bn of cash held offshore this year, which would “be directed primarily to buybacks”.
Apple holds more than 90 per cent of the $246bn of cash on its balance sheet in foreign subsidiaries, and has become one of the largest issuers of debt since it launched its multi billion-dollar buyback and dividend programmer in 2012. The group has since returned about $195bn to shareholders in buybacks and dividends.
The iPhone maker has issued more than $90bn of debt since 2013, including roughly $25bn last year, according to Ideological. Analysts at rating agency Moody’s said Thursday’s sale would raise the company’s adjusted debt to more than $100bn.
Despite the rising debt load, investor demand for the bonds was intense. Underwriters, led by Deutschmark Bank, Goldman Sachs and JP Morgan, counted orders of more than $36bn for the offering, according to two investors and one banker familiar with the deal. The group had initially planned to raise between $6bn and $8bn.
Apple issued the debt across nine tranches, including three floating rate notes that mature in 2019, 2020 and 2022. The fixed-rate notes span two-year to 30-year maturities.
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