HG bonds: Apple prints $14B offering as debt matures, buybacks continue; terms

Apple Inc. today completed a $14 billion offering of SEC-registered senior notes in six parts, marking the second-largest bond placement by the company since it embarked on an aggressive shareholder-return strategy in 2013. The deal also is the largest corporate offering on the U.S. markets so far in 2021, and the biggest since Boeing Co.. placed $25 billion of notes last April, according to LCD.

Apple returned to the bond marketplace after the company in August 2020 netted its lowest-ever funding costs for a broad range of potential uses, via a $5.5 billion placement. Apple also tapped the market in May 2020 for $8.5 billion of notes in four parts, which at the time represented its lowest funding costs since the company in 2013 jettisoned its debt-free standing in order to fund hefty shareholder distributions. To kick off that shareholder-friendly effort, Apple in April 2013 placed a $17 billion offering, its largest to date.

Today's coupon rates fell between those low-cost 2020 pricing outcomes, as the company again locked in proceeds for general corporate purposes, including repurchases of its common stock and payment of dividends under its program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt, filings show. Of note, the issuer faces $7.75 billion of long-term debt maturities this year, including $3.5 billion of notes due Feb. 23, 2021.

Apple last week posted materially stronger-than-expected results for its fiscal 2021 first-quarter earnings, including its best-ever revenue of $111.4 billion, as device sales surged. The company's total net sales for the quarter increased 21% year over year, moving above the S&P Capital IQ consensus estimate for $103.24 billion. Net income of $28.76 billion, or $1.68 per share, was up year over year from $22.24 billion, or $1.25 per share. The S&P Capital IQ consensus EPS estimate was $1.41.

Apple CFO Luca Maestri on last week's earnings call with analysts, reiterated the company's goal of balancing its cash position against debt "over time." He cited nearly $196 billion of cash plus marketable securities at the end of the quarter, versus $112 billion of total debt.

In September 2019, the company completed a $7 billion, five-part offering, its first since 2017, after tax reforms implemented in the closing days of 2017 allowed the company to pivot away from the bond markets while continuing to buy back shares in even larger amounts. Indeed, even after the company returned to the bond markets in 2019, the $84 billion of net cash Maestri reported at the end of the latest quarter was down sharply from $163 billion he reported for the final quarter of 2017.

Meanwhile, Apple's approximately $81.5 billion of share repurchases for the 12 months to Dec. 26, 2020, was about in line with what it repurchased over the same year-earlier period, representing the company's biggest buyback amounts on record, versus $34.4 billion in calendar year 2017 ahead of tax reform, according to S&P Capital IQ.

Apple's AA+/Aa1 ratings profile reflects stable outlooks on both sides. Terms: