In what turned out to be immaculate timing, it was only yesterday that we previewed [8]the collapse in Apple's domestic cash hoard (at the expense of its soaring, if non-recourse offshore cash)...
[9]
... which we concluded by saying that "what this simply means is that after making the history books with the biggest ever, $17 billion bond offering 12 months ago, Apple is about to issue a whole lot more of debt." Less than 24 hours later, it did just that.
Moments ago Apple filed a bond offering prospectus [10], in which it laid out a 7-part bond offering consisting of two FRN tranches (due 2017 and 2019), and 5 fixed rate tranches (due 2017, 2019, 2021, 2024 and 2044), with Goldman and Deustche Bank as lead underwrtiers.
The amount on the tranches are still unknown, although according to preliminary reports they will likely match or surpass the record Apple bond offering from last year, in which the company sold $17 billion in debt.
Bloomberg reports the indicative pricing terms on the various tranches:
- APPLE 3Y FRN IPT 3ML +20 AREA,
- 5Y FRN 3ML +43 AREA
- 3Y FIXED IPT +30 A,
- 5Y FIXED +50 A;
- 7Y NOTES IPT +75 AREA,
- 10Y NOTES +90 AREA,
- 30Y NOTES +115-120
As a reminder, in last year's offering, AAPL issued the following debt:
- FRNs 2016: $1 billion
- FRNs 2018: $2 billion
- Fixed 2016: $1.5 billion
- Fixed 2018: $4 billion
- Fixed 2023: $5.5 billion
- Fixed 2043: $3 billion
As a further reminder, anyone who bought into the 10, and especially 30 year bond offering from last year, was promptly down anywhere between 5 and 10% in absolute price terms shortly thereafter. We expect the same non-flippable event to repeat itself with this issue as well, especially since in light of Apple's 50% expansion in its capital plan to $90 billion per year, we fully expect that the company will have to access the debt capital markets at least once more, and maybe twice, in the next 12 months to maintain its domestic cash balance at minimum safe levels.
Perhaps most important from a market perspective, as bond buyers rush to accumulate positions, they will short matched treasurys to hedge interest rate risk. As a result, since algos translate any bond selling as bullish for stocks, look for an equity pop as accounts position themselves to load up on AAPL bonds.