Apple Inc. has launched a $5.5 billion, four-part offering across $1.25 billion of 2025 notes at T+28; $1.25 billion of 2030 notes at T+58; $1.25 billion of 2050 notes at T+100; and $1.75 billion of 2060 notes at T+118, sources said. The launch levels imply reoffer yields of roughly 0.60%, 1.30%, 1.43% and 2.61%, respectively.
All the tranches were launched in line with at-the-number guidance and through initial whispers in the T+45, T+75, T+115 and T+135 areas, respectively.
Apple — under an AA+/Aa1 ratings profile — is on track to lock in its lowest ever long-term funding costs, but narrowly lost out on setting new record lows. The company last tapped the market in May, when it placed an $8.5 billion, four-part offering, which at the time represented its lowest funding costs since the company in 2013 jettisoned its debt-free standing to pursue an aggressive shareholder-return policy. Today’s new 2025, 2030 and 2050 notes are on track to lock in rates lower than those from the May offering. Of note, in May, it printed 1.125% notes due May 2025 at T+80, or 1.162%; 1.65% notes due May 2030 at T+110, or 1.727%; and 2.65% notes due May 2050 at T+145, or 2.72%.
For reference, the 2025 issue traded on Tuesday at a G-spread of 27 basis points, the 2030 notes changed hands earlier today at a G-spread of 51 bps, and the long bonds traded today at a G-spread of 102 bps, according to MarketAxess.
Alphabet Inc., which last week completed a $10 billion, six part offering — under an AA+/Aa2 ratings profile — printed 0.45% notes due August 2025 at T+25, or 0.47%, or the lowest reoffer yield for a five-year tenor. Apple’s 2025 issue is on track to slot just behind that record-low yield.
Proceeds from today’s bond placement will be used for general corporate purposes, including the repurchase of common stock, and payment of dividends under the program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt, according to regulatory filings.
The Cupertino, Calif.-based company has bought back an equivalent of roughly $76 billion of common stock, and paid out roughly $14 billion in dividends over the last-12-month period to June 27, according to S&P Capital IQ.
Earlier today, S&P Global Ratings assigned an AA+ rating to the new bond placement. “Apple's fiscal third-quarter revenue increased by 11% year over year to $60 billion as its iPhone segment returned to growth and reported a 2% rise in revenue compared with the same period last year on the strong iPhone SE launch, economic stimulus and the lifting of shelter-in-place orders in certain geographies. The company's Mac and iPad sales received a boost from the increase in learning-from-home arrangements and were up 22% and 31%, respectively, year over year. Apple's Wearables, Home and Accessories and Services segments maintained their solid growth trajectories and reported revenue increases of 17% and 15%, respectively, for the quarter,” the agency noted today.
“We believe Apple will maintain its target of a net cash-neutral position over time. The company's cash and investments totaled $194 billion and it had debt outstanding of $113 billion as of June 27, 2020,” analysts added.
On July 31, Moody’s noted that Apple’s “exceptionally strong” operating results in a difficult quarter is evidence of diversity and resilience of business. However, in March, it warned that the coronavirus pandemic has shifted the risk from supply chain challenges and weaker demand in China to deeper demand erosion in the short-term in the U.S. and Western European markets.