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Apple makes US$12b foray into bond market
[NEW YORK] Apple led five borrowers back into the high-grade bond market on Tuesday, selling its first Green bond as part of a US$12bn debt offering that restarted issuance after a six-session lull.
It was the computer giant's first foray into dollar bonds since May last year, and comes just weeks after Apple reported earnings and forecast its first revenue drop in 13 years.
Apple (Aa1/AA+) appeared to pay its highest-ever concessions on the nine-part bond, a possible sign that the buyside remains wary of even top-quality debt in the current climate.
All five deals on Tuesday - which also included IBM, Comcast, Bank of New York Mellon and Toyota - came from the higher tiers of the credit spectrum.
Apple's modest compression in levels through the bookbuilding process could indicate investor appetite for the deal was somewhat price-sensitive.
The price progression could also indicate that the overall tone remains skittish, as bouts of volatility and headline risk have kept issuers on the sidelines in recent days.
"We maintain a cautious stance towards credit in general within our portfolio," said Brendan Murphy, senior portfolio manager at Standish.
"The reason for the caution is still around the macro picture, which remains uncertain."
Given the ongoing market jitters, Apple struggled to bring in pricing on the deal, and was unable to narrow levels at all between guidance and launch.
According to two investors, the company amassed a US$30bn order book, perhaps a bit less than might have been expected for such a highly rated and popular credit.
Apple dropped a two-year floating rate note from the deal, though it did sell a US$1.5bn seven-year Green bond, whose proceeds are dedicated to environmentally friendly projects.
That bond will help fund the company's plan to one day build a facility on its Cupertino, California campus entirely powered by renewable energy.
Apple becomes essentially the first big-name technology company to raise funding in the Green bond space.
"They wanted to make a statement here that they want to be a bigger player in this space," one investor told IFR.
But much of the cash raised from Tuesday's debt sale could go to a stock buyback programme, a shareholder-friendly exercise that occasioned Apple Inc's first-ever bond sale in April 2013.
In late January, the maker of the iPhone reported the slowest-ever increase in shipments of the device, in part due to weakness in the critical Chinese market.
CEO Tim Cook, on a conference call with analysts, said iPhone sales were expected to fall for the current quarter compared with the same quarter last year. That would be the company's first-ever decline in sales of the gadget.
Goldman Sachs, Bank of America Merrill Lynch, Deutsche Bank, and JP Morgan were bookrunners on the Apple bonds, which were quoted some 5bp-7bp tighter in the gray market Tuesday afternoon.
In all US$22bn was raised from Tuesday's five deals.