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Investor orders for Apple’s eighth bond sale of the year reached $16bn, allowing the iPhone maker to tighten terms on the $6bn transaction as its taps debt markets to fund its $300bn share buyback and dividend programme.
The $6bn deal from the technology behemoth, which last week became the first US publicly traded company to command a $900bn market valuation, drummed up $16bn in investor orders, according to two people following the transaction. The demand could prompt Apple to increase the size of its offering to as much as $7bn or $8bn, two people with knowledge of the deal added.
The sale from Apple, following better than expected quarterly results last week, was set to span six maturities from two- to 30-years, with demand heaviest for new seven- and 10-year debt. The 10-year notes were marketed with a yield of 75 basis points above benchmark Treasuries, or roughly 3.07 per cent.
The company’s existing US dollar-denominated debt that matures in 2027 were quoted on Monday with a yield of 3.02 per cent, according to trading platform MarketAxess.
Apple has been among the most prolific issuers of debt this year, trailing only AT&T among corporate sellers of bonds. At $6bn, the sale would lift the Cupertino, California-based company’s full-year debt haul to nearly $35bn, Dealogic data shows.
The company said it planned to use its latest borrowings for general corporate purposes, including share repurchases and dividends. Apple has amassed more than $110bn in debt since 2013 to fund returns to shareholders. More than 90 per cent of the group’s cash is held overseas, and would be subject to US taxes had the company repatriated those holdings to pay a dividend or buyback stock.
A growing number of investors have complained of expensive valuations in the $8.6tn US market for corporate bonds, with risk premiums for investment grade bonds teetering on double-digit levels. The so-called spread on high quality US corporate bonds — a measure of a bond’s yield over a similarly maturing benchmark Treasury — fell to as little as 100 basis points last month.
“Some folks have to be buyers because they are paid to be fully invested,” said Kathleen Gaffney, the director of diversified fixed income at Eaton Vance. “They just don’t have the flexibility. And I am all about flexibility right now when I look at those spreads.”
Companies and banks have taken advantage of the drop in borrowing costs, multibillion-dollar sums raised by Verizon, Amazon, Toyota Motor and Qualcomm this year. Investment grade groups have raised more than $1.2tn so far this year, a record pace.
Bank of America Merrill Lynch, JPMorgan and Goldman Sachs led the bond sale on Monday.
Eric Platt in New York
