Apple is preparing for another potential blockbuster debt sale as global corporations take advantage of a drop in borrowing costs to raise the last batch of funds this year.
The world’s most valuable company has hired Deutsche Bank and Goldman Sachs to organise calls with investors in anticipation of its first return to global debt markets since it sold $12bn in bondsin April, people familiar with the calls said.
A debt sale would probably target the eurozone, where interest rates are lower than in the US, to diversify Apple’s debt investor base.
“If I was Apple, I would try to sell as many bonds, with as long maturities as possible, at the lowest cost possible,” said Jack Ablin, chief investment officer at BMO Private Bank.
“Rates will get higher in the US and the dollar is likely to keep getting stronger, so if you need to raise billions of dollars, it would be best to do it sooner rather than later.”
The combination of Apple’s high credit quality and the likelihood of longer-dated tranches being included in the offer is likely to appeal to pension funds and insurers.
Still, the company needed to be wary of saturating the US debt market after this year’s sale in the aftermath of a $17bn offer in 2013, analysts said – hence its examination of foreign markets.
“It makes sense to diversify funding sources and to widen the pool of investors,” said Mr Ablin. “Apple could sell bonds in yuan if they want, but right now in Europe rates are very low and their central bank is still accommodative.”
In April the maker of the iPhone sold a combination of floating and fixed-rate notes, with maturities ranging from three to 30 years. Demand for the double A rated debt reached $40bn. Deutsche Bank and Goldman also managed the sale.
Apple used a portion of the proceeds from the debt sale to fund a $90bn buyback programme instead of tapping its $150bn cash pile, which would incur tax charges.
The new bond offer comes at a time when demand for corporate debt has increased in the past couple of weeks as US Treasury yields dropped even as the US Federal Reserve wrapped up its latest round of quantitative easing.
Ten-year Treasury note yields, which move inversely to prices, stood at 2.3 per cent on Monday, down from a high of 2.66 per cent in May. That compares with yields of 0.84 per cent for German Bunds with similar maturities, and 3.03 per cent for investment-grade corporate debt, according to Barclays indices.
The drop in borrowing costs has helped spark a wave of corporate bond sales in the past couple of days. Companies with lower credit ratings have been particularly aggressive, announcing $3.3bn of deals on Monday alone.
Analysts said corporate borrowers were trying to squeeze in as many sales as possible between now and the end of November when capital markets activity starts to slow in the US.
“At one point the mismatch between borrowing costs and the pick-up in economic activity will catch up, so this is a good moment to come to market,” said Mr Ablin.
Get alerts on Apple Inc when a new story is published