(Bloomberg) — Apple Inc. is borrowing in the bond market for the first time in nearly two years, as cheap borrowing costs tempt even companies flush with cash.
The tech giant joins a slew of companies that are rushing to borrow in investment-grade debt markets after the Labor Day holiday, taking advantage of yields near all-time lows. Tuesday saw a record 21 bond sales totaling almost $27 billion, led by Walt Disney Co. More than a dozen companies had already announced deals Wednesday as of 9:05 a.m. in New York.
Apple, which has more than $200 billion in cash and securities on its books, is selling senior unsecured bonds in as many as five parts, according to a person with knowledge of the matter. The longest portion of the offering, a 30-year security, may yield around 1.25 percentage points above Treasuries, said the person, who asked not to be identified as the details are private.
Apple, along with peers Oracle Corp. and Microsoft Corp., has not tapped the bond market since new U.S. tax laws took effect at the beginning of last year, allowing companies to repatriate overseas earnings at a lower cost. It’s been tapping that source of cash to fund capital returns in the meantime, an activity it had typically relied on investors for. The company last sold bonds in November 2017, in a $7 billion debt offering.
With a rally in Treasuries pushing the average investment-grade bond yield to just 2.79%, companies are getting in while the getting is good. Disney hadn’t issued bonds in nearly a year until Tuesday, and Coca-Cola Co. is borrowing in dollars Wednesday for the first time since May 2017. Hewlett Packard Enterprise Co. is also returning to the market after a yearlong absence.
Apple has been aiming for a net-cash-neutral position, but its cash still exceeds debt by around $100 billion. In April, it increased its share repurchase program to $175 billion from $100 billion, of which $78.2 billion had been used by the end of June. Proceeds from the bond sale could be used to buy back shares, as well as for acquisitions and debt repayment.
Bank of America Corp., Deutsche Bank AG and Goldman Sachs Group Inc. are managing Apple’s bond sale, the person said.
(Updates with other deals starting in the fifth paragraph.)
To contact the reporter on this story: Molly Smith in New York at [email protected]
To contact the editors responsible for this story: Nikolaj Gammeltoft at [email protected], Dan Wilchins, Christopher DeReza
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