Apple Offers Record $17 Billion Worth of Bonds
(CUPERTINO, Calif.) — Apple Inc. [NASDAQ: AAPL] Tuesday revealed details of the largest nonfinancial debt deal ever, but should retail investors buy a piece of the tech giant’s $17 billion bond offer?
The new debt is rated AA-plus by credit rating company Standard & Poor’s, the same rating for U.S. Treasuries. Moody’s Investors Service rated it AA1, instead of its highest stamp of AAA. Moody’s has given U.S. Treasuries the highest rating, but with a negative outlook.
The Cupertino, Calif.-based iPad and iPhone maker is offering six types of bonds with different time horizons from three to 30 years, two of which are floating.
For the short-term bonds, the yields for Apple are slightly higher than those of U.S. Treasuries, but Jody Lurie, corporate credit analyst at Janney Capital Markets, said that doesn’t mean retail investors should ask their brokers to invest in Apple bonds in the secondary market.
Apple is taking advantage of record-low rates, in other words, borrowing cheaply to raise money while it keeps its impressive cash reserves. The company’s cash balance at the end of its second quarter is $145 billion, said Apple chief financial officer Peter Oppenheimer last week.
Investors have nagged Apple’s leadership over its cash pile, much of which is abroad and would be subject to higher tax rates if repatriated.
The bond offering has generated more than $50 billion in new orders from institutional investors, according to people familiar with the matter, the Wall Street Journal reported.
A spokesman for Apple said the company will release a term sheet in the near future with additional financial details. The company will return $100 billion to Apple shareholders by the end of 2015.
Last week, Apple announced higher-than-expected second-quarter earnings while announcing it is expanding its stock buyback program to $60 billion, up $10 billion.
Investors are more optimistic about the company’s stock than in previous months. On Tuesday afternoon, shares of Apple rose to $443.02, up 3 percent, after consistently trading below its 50-day moving average for the last several weeks.
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