Less than a month after tapping the Canadian bond market for the first time, Apple (AAPL 1.27%) is back for more. The Mac maker just sold another $5 billion in debt to boost its domestic cash position further in order to fund its aggressive capital-return program. The latest offering of notes range in maturity from two years to 30 years.
This comes just days before the company is preparing to unveil its highly anticipated 10th-generation iPhone next week at its new Apple Park campus.
iPhone 7. Image source: Apple.
Only fixed-rate notes this time
This time around, Apple is going with fixed notes, in contrast with prior offerings that also included floaters. Apple was considering a floating-rate tranche, but decided to stick with fixed-rate notes, according to Bloomberg. Here's a quick breakdown of the tranches that made up the $5 billion offering:
|
Principle |
Coupon |
Maturity |
|---|---|---|
|
$1 billion |
1.5% |
September 2019 |
|
$1 billion |
2.1% |
September 2022 |
|
$2 billion |
2.9% |
September 2027 |
|
$1 billion |
3.75% |
September 2047 |
Data source: SEC filings.
Bloomberg also notes that Apple was able to obtain favorable pricing on the 2047 notes, citing an anonymous source. That paper is priced with a spread of 110 basis points over comparable Treasuries, better than the original spread of 125 basis points.
Apple repurchased $7.5 billion worth of stock last quarter and paid out $3.4 billion in dividends and dividend equivalents. Add in another $0.9 billion for net share settlement, and the company returned a total of $11.7 billion last quarter. Total gross cash before factoring in debt at the end of June was $261.5 billion, but only $15.5 billion of that total is held domestically. Apple typically only allows its domestic cash position to fall to around $15 billion before bolstering it with debt.
Data source: SEC filings. Chart by author. Calendar quarters shown.
There will be more
Total debt and commercial paper at the end of last quarter totaled $108.3 billion. Adding in the roughly $1.9 billion from the Canadian offering with this last batch of $5 billion should bring total debt to around $115.2 billion before considering any changes to Apple's outstanding commercial paper. Commercial paper is a more flexible short-term debt instrument that is often used to fund working capital, and does not require regulatory filings like term-debt offerings. Apple had nearly $12 billion in commercial paper outstanding at the end of last quarter.
Apple boosted its share repurchase authorization by $35 billion, to $210 billion in May, which is good through March 2019. Of that total authorization, the company had repurchased an astounding $158.5 billion through June. Unless that tax repatriation holiday ever comes to pass, investors should expect the Mac maker to keep piling on more debt to fund capital returns.
