After reducing its debt load in recent years amid high borrowing costs, Apple Inc (NASDAQ: AAPL) revealed plans overnight to tap the United States investment-grade bond market with a multi-part debt offering.
The iPhone maker, which has cash and cash equivalents of nearly US$30 billion, told the market that it’s proceeding with this issue to finance acquisitions, cash returns to shareholders in the form of share buybacks and dividend payments.
The tech giant’s first corporate bond sale in two years – which is understood to include debt issuance in as many as four tranches – follows Apple’s warning late last week that tariffs will increase costs by about US$900 million this quarter.
Undisclosed sources advised the media that initial price discussions for the deal’s longest portion, a 10-year note, are expected to be 0.7 percentage points above comparable U.S. Treasuries.
The relatively high yields – 5 basis points more on its new debt compared with Apple’s existing securities - are seen as a sign that investors are demanding more to hold debt from companies under pressure from U.S. President Donald Trump’s tariff offensive.
It’s understood that the premiums Apple is offering - aka its new issue concessions – are high relative to the average for companies this year of about 3.8 basis points.
In another telltale sign of relatively modest demand, investors placed orders for 1.9 times as many three-year Apple notes as were for sale, and about 2.6 times as many for the 10-year securities.
To put that in context the average coverage level for issuers this year is 3.6 times.
Apple last sold bonds in May 2023, issuing US$5.25 billion across five parts, including a 30-year maturity.
At the end of March, Apple reported US$92 billion in long-term debt, down from about US$113 billion during the same period in 2022.
The deal comes as bankers expect US$35 billion to US$40 billion in issuance of new U.S. high-grade corporate bonds this week, with industrial and technology firms like Apple and GM potentially accounting for the bulk of sales.
Much of the week’s [high grade bond] supply is expected to be sold ahead of the Federal Reserve’s rate decision on Wednesday, with Nine borrowers selling $14.45 billion in U.S. high-grade bonds yesterday alone.
Barclays, Bank of America, Goldman Sachs and JPMorgan manage Apple’s debt sale.
In the wake of Apple’s latest corporate bond announcement, stock shares were down more than 3% on the New York Stock Exchange.
