On April 23, Apple officials said on the debt-free company’s earnings call that “we will access the U.S. debt markets over time,” as it prepares to return roughly $100 billion to shareholders through calendar-year 2015. The plan is expected to weigh on domestically domiciled cash balances, as the company resists repatriating material amounts of offshore cash due to tax implications.
The announcement prompted ratings agencies to assign AA+/Aa1 debt ratings. Triple-A ratings appeared to be constrained by Apple’s weighting top offshore cash in its $140-billion balance of overall cash and marketable securities, though market participants note that demand indications and early talk indications suggest Apple will be treated as a top-tier credit as accounts compete to add the previously debt-free name to portfolios.
“We expect Apple to maintain cash and marketable securities in excess of $100 billion, with the majority of balances remaining offshore (and thus subject to repatriation taxes),” S&P analysts wrote in ratings rational published last week. “We expect Apple's increased commitment to shareholder returns to be skewed toward share repurchases, that shareholder returns will continue to be re-assessed over time, and that the company will manage leverage below 1x.”
Apple today filed to sell three- and five-year issues in both fixed- and floating-rate formats, along with fixed-rate, 10- and 30-year issues. Initial whispers circulated in the L+20 and T+35 areas for the three-year issues; in the L+40 and T+55 areas for the five-year issues; in the T+90-95 range for the 10-year issue; and in the T+115-120 range for the 30-year issue.
The midpoints of initial price talk levels point Apple to fixed-rate reoffer yields in the 0.65% area for three-year notes, the 1.21% area for five-year notes, the 2.57% area for 10-year notes, and the 4.01% area for 30-year bonds. Talk is expected to tighten over the course of marketing today, which could put Apple on track for the lowest-ever costs recorded for a three-year maturity, currently held by
For reference, low reoffers recorded so far this year include 0.62% for three-year 0.6% Wal-Mart notes (AA/Aa2) issued April 4 at T+30; 1% for
After facilitating investor calls yesterday, Goldman Sachs and
Proceeds back general corporate purposes, including share repurchases and dividends under the recently expanded plan to return cash to shareholders, according to regulatory filings. “On April 23, 2013, we announced that we increased our existing share repurchase program authorization from $10-60 billion and raised our third quarter 2013 cash dividend by 15%,” the company said.
For reference, last year's largest bond offering was from
