Apple Shores Up $8.5 Billion in Debt For Dividend Payout, Share Buybacks

Apple Inc. (AAPL) raised $8.5 billion in a four-tranche bond offering as the tech giant tapped debt markets at record-low interest rates to fund dividend payments, stock repurchases, among others.

The iPhone maker issued the $8.5 billion in debt by selling four different bonds with maturities ranging from three years to 30 years, according to a Reuters report. It sold a $2 billion three-year bond and a five-year $2.25 billion with coupons of 0.75% and 1.125% respectively, the lowest rates the company has paid on bonds with such durations since 2013, according to Refinitiv IFR data.

“We intend to use the net proceeds from sales of the notes for general corporate purposes, including repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt,” Apple said in a preliminary prospectus submitted in a SEC filing.

The U.S. central bank has kept interest rates near zero to help the economy recover from the financial hardships caused by the coronavirus pandemic and enable businesses to borrow money at cheap rates. Apple joins a list of large corporates taking advantage of cheap borrowing costs. Boeing Co (BA), the ailing planemaker, said this week it raised $25 billion in debt financing and told investors that as a result it would not need to tap the U.S. government for additional funding for now.

As of March 28, 2020, Apple had $98 billion of unsecured senior notes and $7.5 billion of unsecured short-term promissory notes outstanding but no secured senior debt outstanding, according to the prospectus.

The joint book-runners on the debt sale were Goldman Sachs & Co., BofA Securities, J. P. Morgan and Morgan Stanley.

Wall Street analysts have a bullish outlook on Apple’s stock awarding a Strong Buy consensus rating which is based on 27 Buys, 4 Holds and 1 Sell. The $320.07 average price target indicates 9.2% upside potential for the shares in the coming 12 months. (See Apple stock analysis on TipRanks).

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