Buybacks Must Continue: AAPL, IBM Unveil Major Debt Issuance To Fund Shareholder-Friendliness

With investment grade credit risk soaring, it's now or never for many firms to lever up at "relatively" low costs and two of the biggest buyback-ers are stepping up to the debt issuance window this week. Perhaps helping to explain the carnage in Treasuries at the end of last week (as rate-locks are set), Apple has unveiled a 10-part deal which could price today and IBM a 7 part deal. No size is indicated yet but Apple's previous two issuances were $8bn and $6.5bn.

As the cost of funding buybacks rise, so the window is closing for releveraging on the cheap...

 

Apple sold $8b debt in 7-part offering in May 2015; $6.5b debt in 5-part offering in Feb. 2015, and so it is time for some more monetization of that overseas cash... in as many as a 10-part deal...

IPT:

  • 2Y fxd +75a; 2Y FRN 3mL equiv
  • 3Y fxd +90a; 3Y FRN 3mL equiv
  • 5Y fxd +115a; 5Y FRN 3mL equiv
  • 7Y green bond +145a
  • 10Y fxd +160a
  • 20Y fxd +200a
  • 30Y fxd +215a

SEC Registered
Expected Issue Ratings: Aa1/AA+
UOP: General corporate purposes, including repurchases of Apple’s common stock and payment of dividends under the company’s program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt; the company intends to use the net proceeds from sales of the 2023 Fixed Rate Notes for the investment in one or more eligible projects
Bookrunners: BofAML, DB, GS, JPM
Settlement: T+5 (Feb 23, 2016)
Denom: 2,000 x 1,000

 

And IBM a 7-part deal...

IPT:

  • 18-month FRN 3mL+55a
  • 3Y +95a; 3Y FRN 3mL equiv
  • 5Y +115a; 5Y 3mL equiv
  • 10Y +180a
  • 30Y +215-220

SEC Registered
Expected Issue Ratings: Aa3/AA-
Bookrunners: BNP, Barclays, C, JPM
Denoms: 100k x 1k
Use of Proceeds: GCP

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Notably, both IBM and AAPL have seen their credit risk almost double in the last year...