Apple Inc. raised A$2.25 billion ($1.6 billion) with a debut Australian debt sale that’s the largest bond deal ever Down Under by a non-financial company.
The iPhone maker sold A$1.15 billion of seven-year notes at a yield of 110 basis points more than swap rates and A$1.1 billion of four-year securities at a 65 basis point spread.
Apple, which until November had only sold U.S. currency bonds, has since expanded its debt issuance to euros, yen, pounds and Swiss francs as well as Aussie dollars. It follows a A$700 million inaugural offering last month from brewer SABMiller Plc and joins other overseas-based issuers such as Total SA and Toronto-Dominion Bank in making Australian debuts over the past 12 months.
“It certainly looks like a successful deal, especially if you consider the prevailing sentiment at this moment, it’s not been the most positive of days to issue,” said John Sorrell, head of credit at Nikko Asset Management Ltd. in Australia.
Investors around the world sold riskier assets on Friday as a gauge of Chinese manufacturing plunged to the lowest level since 2009. The recent selloff in corporate bonds has pushed average credit spreads globally to the widest level since 2012, based on Bank of America Merrill Lynch indexes.
The deal from Apple eclipses the A$1 billion transaction from BHP Billiton Ltd. in March that had been this year’s largest non-financial company bond sale, according to data compiled by Bloomberg.
The proceeds of Apple’s Kangaroo bond sale may be used to return capital to shareholders through stock buybacks and dividends, sale managers said in an earlier statement announcing plans to do an Aussie transaction. The Cupertino, California-based company announced in April it was boosting its capital-return program by $70 billion through March 2017 and would be accessing both U.S. and international debt markets to help pay for it.
All of the longer maturity notes from Apple will be fixed-rate securities, while at the shorter tenor they are set to issue a fixed-rate portion of A$400 million and a floating-rate tranche of A$700 million. Initial price guidance on the four-year debt was for a spread of about 70 basis points, while the price talk on the seven-year notes was a gap of about 115 basis points.
“It must have had a very wide range of acceptance,” Nikko’s Sorrell said, citing Apple’s position as a well-known brand and its strong credit rating as factors that would have helped attract both international and domestic investors.
Apple carries the second-highest credit ratings at both Standard & Poor’s and Moody’s Investors Service. The final order book for the transaction was about A$3 billion, a person familiar with the matter said.
The sale was managed by Commonwealth Bank of Australia, Deutsche Bank AG and Goldman Sachs Group Inc.