Apple has joined the debt-issuing boom among technology giants and has decided to sell $5.5 billion in bonds, for the second time in 2020, unlike past years in which it hadn’t borrowed in dollars for more than once in a calendar year. With borrowing costs cheap and rich companies like Amazon and Google parent Alphabet Inc. getting in on the action, it has helped the company to issue debt and set a new floor for yields.
According to the preliminary filing with the Securities and Exchange Commission, the bonds are sold in four parts that would mature in five, ten, thirty, and forty years. The longest 40-year security is expected to yield 118 basis points above treasuries and will be cheaper than Amazon which is priced at 130 basis points over treasuries but slightly more than Google’s 108 basis points.
The tech giants have fared well during the COVID-19 pandemic as their consumers were confined to the home and reliant on gadgets and connectivity unlike the rest of the economy, with Apple’s stock price surging to a $2 trillion market capitalization milestone.
It will use the money to buy back stock and pay dividends, among other general corporate purposes. Apple has enlisted Goldman Sachs, Barclays, and J.P Morgan as underwriters on the bonds.
However, the credit boom has favored big American companies and has left behind the smaller ones.
