Apple, the world's largest technology company, was tapping investors yesterday to buy into a debt offering that would rank as one of the biggest this year.
The maker of the iPhone might offer $8 billion to $10 billion in securities, split across floating- and fixed-rate notes, with maturities ranging from three to 30 years, people familiar with the sale said.
Deutsche Bank and Goldman Sachs, who are managing the sale, declined to comment.
Apple plans to use the proceeds of the debt sale to fund a $90 billion buyback rather than tap its $150 billion cash pile.
The group is set to sell debt at much higher yields than a year ago, which is likely to attract strong demand as money continues to flow into bond funds, leaving managers with reduced opportunities to invest growing cash piles.
"This sale makes a lot of sense for Apple," said Michael Mullaney, a fund manager at Fiduciary Trust.
“Borrowing rates are low and there has been a voracious demand for any paper that offers a bit of yield. It will sell immediately.”
Apple’s bond sale comes as demand for high-quality corporate debt has reached levels last seen during the credit boom era.
The rally in investment-grade debt has been so strong this year that the risk premium – the difference between the bonds’ yields and those of similar US Treasuries – has dropped sharply and is close to breaking below 100 basis points for the first time since July 2007.
A fall below the “century mark”, as analysts and traders call the threshold, is seen as indicating that risk premiums are too narrow, leaving investors with an inadequate cushion in the event of a rise in benchmark interest rates.
Edward Marrinan, head of macro credit strategy at RBS Securities, said a break below 100bp would grab "people's attention".
(c) 2014 The Financial Times Limited
