By Mike Cherney
Apple Inc. is back in the bond market.
The tech giant sold $8 billion in bonds on Wednesday, more than
the roughly $6.5 billion some investors had expected earlier in the
day.
The company said it would use proceeds to help pay for share
buybacks and dividends, part of an expanded capital-return program
for shareholders Apple announced last month.
Apple's bond sale comes after a number of large sales from
highly rated companies, as issuers take advantage of the continued
low interest-rate environment and as investors look for bonds that
offer more yield than safe government debt.
Underscoring those points, Royal Dutch Shell PLC sold $10
billion in bonds on Wednesday. On Tuesday, AbbVie Inc. sold $16.7
billion worth, while Oracle Corp. sold $10 billion last week.
AT&T Inc. sold $17.5 billion last month, while earlier in the
year, Actavis PLC placed a $21 billion deal.
The wave of new deals, however, has weighed on bond prices. So
far in May, high-grade U.S. corporate bonds have posted a negative
total return, reflecting price changes and interest payments, of
0.89%, according to Barclays data. The broader bond market has also
seen a selloff in recent days, but U.S. Treasurys have fared
better, posting a negative return of 0.65%.
As a result, Apple found it more costly to borrow on Wednesday
compared with its previous deals. A 30-year Apple bond on
Wednesday, for example, was priced to yield 4.397%, or 1.40
percentage points more than comparable Treasury bonds. In February,
Apple sold 30-year bonds at a yield of 3.498%, or 1.25 percentage
points more than Treasurys. Lower yields indicate higher
prices.
Some investors said the higher yields made Wednesday's Apple
bonds a good buy. Leon Burger, senior credit analyst at Principal
Global Investors, said his firm put in an order for the new Apple
bonds, which carried maturities of between two and 30 years.
"Right now, you look at the credit metrics, and they're very
strong," said Mr. Burger, whose firm oversees roughly $343
billion.
Apple is coming off a strong quarter. The company reported a 33%
increase in earnings for the quarter ended March 28, with net
profit totaling $13.6 billion, compared with $10.2 billion in the
year-earlier period. Strong iPhone sales helped boost the company's
performance.
Investors had been expecting Apple to tap the bond market, given
that the company had sold bonds at this time of year during the
previous two years. The deal Wednesday, however, was Apple's second
U.S. bond sale this year, after selling $6.5 billion in February.
"It's the second time they've issued this year, so it doesn't feel
like it's that one-time, big-event type thing," Mr. Burger
said.
Apple's bond sale in April 2013 clocked in at $17 billion, which
at the time was the largest corporate bond sale on record. That
deal was eclipsed by a $49 billion sale from Verizon Communications
Inc. in September 2013.
Goldman Sachs & Co., Bank of America Merrill Lynch and J.P.
Morgan helped coordinate Apple's sale on Wednesday, according to a
prospectus.
Write to Mike Cherney at mike.cherney@wsj.com
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B03MLX29
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B03MM408
Access Investor Kit for Apple, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0378331005
Access Investor Kit for Oracle Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US68389X1054
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7802591070
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7802592060