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Taking advantage of record low borrowing rates, Apple has issued a five-part bond sale of both floating and fixed rate notes worth $7 billion in an effort to raise capital and fund its dividend and share buyback program. The large-scale debt raising transaction was underwritten by Goldman Sachs, Merrill Lynch, J.P. Morgan, and Deutsche Bank and was oversubscribed by roughly three times at $21 billion, according to the Financial Times.
The paper also reports that the Cupertino-based company has raised roughly $74 billion through debt markets since 2013.
According to the SEC filing, the five classes of notes, of varying maturation dates and interest rates, included $350 million of the aforementioned floating rate bonds, linked to a three-month LIBOR plus 14 basis points, due to mature in 2019. The second tier was $1.15 billion maturing in 2019, with fixed rate of interest of 1.1%. The third set of bonds was $1.25 billion maturing in 2021 at a fixed 1.25% interest rate. The largest group of bonds included $2.25 billion at a 2.45% fixed rate which is set to mature in 2026. Finally, Apple issued $2 billion of 3.45% fixed rate notes due to mature in thirty years in 2046.
The SEC filing also reveals that the bonds were rated double-A plus, which is one peg lower than the highest possible triple-A rating, by Standard & Poor’s ratings services. Both Moody’s and Standard & Poor’s rated the debt stable, which comes as little surprise.
While Apple is flush with cash reserves, many of them are held overseas and would be subject to taxation were they to be repatriated to the United States, Mac Rumors notes. As such, it is likely that Apple has opted to raise money by borrowing at a low-interest rate in the US to pay dividends to shareholders and fund its share buybacks.