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Apple, Inc. Just Raised More Debt

By Evan Niu, CFA - Feb 19, 2016 at 11:30AM

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The iPhone maker now has nearly $68 billion in long-term debt.

You can't say that Apple (AAPL 1.30%) didn't warn you.

Earlier this week, the Mac maker sold $12 billion worth of bonds, at the high end of expectations. Due to recent global macroeconomic uncertainty, the bond market hasn't been all that active, especially for large-cap names looking to raise some capital. But global markets are starting to calm down a bit, so it's about time to jump back in.

Apple needs more cash
Much like with prior bond sales, Apple sold this batch in numerous tranches that go out as far as 30 years.

Principal Amount

Floating/Fixed

Interest Rate

Maturity

$500 million

Floating

LIBOR + 82 bps

February 2019

$500 million

Floating

LIBOR + 113 bps

February 2021

$500 million

Fixed

1.3%

February 2018

$1 billion

Fixed

1.7%

February 2019

$2.25 billion

Fixed

2.25%

February 2021

$1.5 billion

Fixed

2.85%

February 2023

$2 billion

Fixed

3.25%

February 2026

$1.25 billion

Fixed

4.5%

February 2036

$2.5 billion

Fixed

4.65%

February 2046

Data source: SEC filings. bps = basis points.

At the end of last quarter, Apple had a total gross cash position of $215.7 billion, or a net cash position of $160 billion after backing out $55.7 billion in total long-term debt (not including commercial paper). With this bond offering, long-term debt should increase to nearly $68 billion.

As CFO Luca Maestri reiterated on the last conference call, Apple will continue to be very active in global debt markets to raise cash in order to fund its aggressive capital return program. Investors should get an update in April on how Apple will boost this program. For the most part, this cash will be used for capital returns and other general corporate purposes. That also includes paying down other debt. You may note that the current portion of Apple's long-term debt, due within the next year, is $2.5 billion right now.

Saving the world, one tranche at a time
However, one specific tranche, the 2023 Fixed Rate Notes is being allocated to specific "Eligible Projects." This $1.5 billion tranche is set aside for projects and investments in environmental sustainability. The three priorities that Apple has for these projects are:

  1. Reduce the company's corporate impact on climate change by using renewable energy and improving energy efficiency throughout its products, supply chain, and facilities.
  2. Use more environmentally friendly materials throughout its products.
  3. Save precious resources.

Apple will evaluate various projects based on how they further these goals. The company wants to continue expanding its use of solar and wind energy while also utilizing energy storage. Apple also wants to improve energy efficiency by designing its facilities in innovative ways (you may have heard of a certain spaceship that's about to land in Cupertino). Apple will provide updates on how these funds are used for these purposes on its investor relations site.

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