Apple just exploited the debt market to raise $ 14 billion
It’s been about six months since the last time Apple (NASDAQ: AAPL) uses the debt market to raise liquidity. The company sold $ 5.5 billion worth of paper last August to take advantage of the favorable interest rate environment, a few months after the $ 8.5 billion bond issue in May. After reporting his first quarter of $ 100 billion last week, Apple decided to sell a new batch of bonds.
Here’s what investors need to know.
Raise $ 14 billion
Earlier this week, Apple priced a new 6-tranche bond offering to raise $ 14 billion, its biggest debt consolidation offering in years. While the Mac maker sometimes used to include variable rate notes, it now favors fixed-rate bonds in order to lock in low borrowing costs, especially for bonds with a maturity of several decades.
|February 2026||0.7%||$ 2.5 billion|
|February 2028||1.2%||$ 2.5 billion|
|February 2031||1.65%||$ 2.75 billion|
|February 2041||2.375%||$ 1.5 billion|
|February 2051||2.65%||$ 3 billion|
|February 2061||2.8%||$ 1.75 billion|
|Total||$ 14 billion|
After taking into account subscription discounts and other transaction costs, the Cupertino tech giant expects net proceeds to be around $ 13.9 billion. Apple says it intends to use the proceeds for general corporate purposes, which could include returns on capital such as funding its share buyback program.
83.5 billion dollars to go
This should all be familiar to longtime Apple investors, as the company has used debt at the heart of its capital allocation strategy for nearly a decade. A few years ago, CFO Luca Maestri launched a “net cash neutral“, where the gross cash is roughly equal to the long-term debt load, for the company. That would still leave Apple plenty of cash to operate while improving its capital structure. Apple has been working on it ever since, and the l The company almost halved its net cash during this period.
However, this is easier said than done because Apple generates large sums of money. The company’s net cash position increased $ 4.1 billion sequentially in the last quarter to $ 83.5 billion. This was after spending $ 24 billion on free market buyouts. Note that the bond offerings do not have a significant impact on Apple’s net cash position initially, as the deal adds roughly the same amount of assets (cash) and liabilities (debt). on the balance sheet.
Apple has now repurchased $ 402.7 billion of shares since it launched its return on capital program in 2012, an incredible amount. With $ 83.5 billion in net cash at the end of 2020, Apple still has some work to do to reach its goal.
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