Apple starts 4-part bond sale to fund buybacks, dividends

Apple is tapping the high-grade bond market with a sale in as many as 4 parts.

The longest portion of the offering, a 40-year security, may yield around 150 basis points over US Treasuries, according to a person familiar with the matter.

Proceeds from the sale are earmarked for general corporate purposes, including the financing of share buybacks and dividends, said the person, who asked not to be identified as the details are private.

The sale comes after the US primary market for investment-grade bonds sprang back to life in the second half of July amid a credit market rally. Many of the big banks brought large debt sales after reporting earnings, helping supply beat expectations for the month. The momentum is expected to continue into this week with Wall Street syndicate desks expecting around US$30 billion of new high-grade bond supply.

Apple appears to be taking advantage of the recent stability and relatively cheaper cost of funding in the high grade market. The yield on Bloomberg's benchmark investment-grade index hit a nearly 2-month low on Friday (Jul 29).

The iPhone maker's cash and cash equivalents stockpile sits at nearly US$180 billion, while it has paid out around US$14 billion dividends each of the last 3 years.

Goldman Sachs Group, JPMorgan Chase and Bank of America are leading the sale, the person said.

In December, Apple's long-term credit was upgraded to Aaa by Moody's Investors Service, putting it in an exclusive club with Microsoft Corp. and Johnson & Johnson as the only US corporations in the S&P 500 with the highest possible credit rating. BLOOMBERG