Apple selling $14 billion of bonds as share buybacks seen rising

Until 2020, Apple hadn’t borrowed in the US investment-grade market more than once in a calendar year since 2017.

Apple is coming off a quarter in which revenue topped $100 billion for the first time. (REUTERS)

Apple Inc. is selling $14 billion of bonds to take advantage of cheap borrowing costs, tapping the market for a third time since May as it looks to return more cash to shareholders.

The company is issuing debt in six parts, according to a person with knowledge of the matter. The longest portion of the offering, a 40-year security, will yield 95 basis points above Treasuries, after initially discussing between 115 and 120 basis points, said the person, who asked not to be identified as the details are private.

Until 2020, Apple hadn't borrowed in the U.S. investment-grade market more than once in a calendar year since 2017. But rock-bottom interest rates are proving too tempting for the world's most valuable company to pass up as it pursues aggressive share buybacks and dividends.

Apple's outstanding 40-year bonds, the 2.55% securities due 2060, widened more than 5 basis points Monday to trade around 89 basis points over Treasuries, according to Trace. Bondholders typically sell out of their positions to make room for the new notes, which often come with a heftier yield to entice investors.

The average investment-grade company can borrow at a rate of 1.86% for about nine years, according to Bloomberg Barclays index data. That's down from 1.94% when Apple was last in the market in August.

The tech giant said it will use the proceeds for general corporate purposes, including buying back stock and paying dividends. It may also be used in funding for working capital, capital expenditures, acquisition and repayment of debt, the person said.

After years of hoarding cash, Apple has been working to reduce its net cash position, largely through payouts to stockholders. Still, the company may need to expand its annual shareholder returns to over $100 billion to reach its net-cash neutral target over the next few years, according to Bloomberg Intelligence.

Apple is coming off a quarter in which revenue topped $100 billion for the first time. Executives didn't provide an official forecast in reporting earnings Wednesday, but warned that sales growth from AirPods and other wearables will decelerate in the current period.

Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are managing the bond sale, the person said.