Apple raises $7b to fund share buybacks

It has become a fixture in the bond market, relying on debt to fund a share-repurchase programme

Apple Inc. sold $7 billion in bonds in its third undertaking this year to add debt for shareholder rewards.

The offering was embraced by investors, allowing the iPhone maker to lower yields on the proposed securities that will also be used for working capital, acquisitions and debt repayments, according to a person with knowledge of the deal, who asked not to be identified because the information isn’t public.

Apple has become a fixture in the bond market, relying on debt to fund a sharerepurchase programme that got boosted in April to $175 billion from $140 billion. Earlier this year, it sold $12 billion of bonds, only to add another $3.5 billion to the sale a month later.

The company has about $71.6 billion of bond debt across several currencies, according to its latest quarterly filing. “There’s demand for Apple,” said Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New York. The longest portion of the deal, $2 billion of 3.85 per cent 30-year bonds, yield 1.63 percentage points above Treasuries, according to data compiled by Bloomberg. That’s down from an initial offer of 1.8 percentage points.

More than $214 billion of Apple’s $232 billion cashpile is held overseas. The Cupertino, California-based company has been tapping credit markets, where borrowing costs are hovering near record-lows, to reward shareholders instead of repatriating that overseas cash because it would be taxed by the US.

“They’ve become very accustomed to coming to market,” said Jody Lurie, a credit analyst at Janney Montgomery Scott. “While it’s still notable, they still have the AA ratings and there are a lot of investors who want or need to own the bonds for various reasons, it doesn’t have the same level of allure.”