Apple Starts Four-Part Bond Sale to Fund Buybacks, Dividends

(Bloomberg) — Apple Inc. is tapping the high-grade bond market with a sale in as many as four parts.

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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.

Read more: NEW DEAL: Apple $Benchmark Debt Offering in 4 Parts

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 $30 billion of new high-grade bond supply.

Apple, one of eight companies selling new high-grade bonds Monday, appears to be taking advantage of the recent stability and relatively cheaper cost of funding in the corporate market. The yield on Bloomberg’s benchmark investment-grade index hit a nearly two-month low on Friday.

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

“Apple consistently borrowing tens of billions of dollars annually is due more to its confidence in expanding cash flow than operational needs,” Bloomberg Intelligence analyst Robert Schiffman wrote Monday.

Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp 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.

(Updates with number of high-grade deals, Bloomberg Intelligence commentary starting in fifth paragraph.)