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Investors throw $52 billion at Apple, are Apple bonds a good investment?

Karen Haslam | May 3, 2013
Despite having $145 billion in the bank, Apple has decided to reach out to the debt market to offer $17 billion in bonds in order to pay money back to investors. Why would Apple need to go to such lengths and what does it mean to investors? We answer your questions.

By the end of the day the breakdown was as follows, according to Benzinga.

$5.5 billion 10-year bonds priced to yield 2.415 percent, a spread of 75 basis points over the 10-year Treasury.$1.5 billion in 3-year notes priced to yield 0.511 percent, a spread of 20 basis points over similar Treasuries.$4 billion of 5-year notes priced to yield 1.076 percent, a spread of 40 basis points to the 5-year Treasury.$3 billion in 30-year bonds priced to yield 3.883 percent, a spread of 100 basis points over the 30-year Treasury.$1 billion of 3-year floating rate notes to yield 5 basis points above the 3-month Libor rate.$2 billion of 5-year floating rate notes to yield 25 basis points above the 3-month Libor rate.

Has Apple ever done anything like this before?

Yes. But this is Apple's first bond offer in almost 20 years.

How does this compare to other bond deals?

Reports claim that this is the largest non-bank bond deal in history. Apple put up $17 billion for sale which trumps the $14.7 billion deal from Abbott Laboratories spin-off AbbVie last November

However, another report suggests that Automaker General Motors may have a bigger offering, when they sold $17.5 billion in bond financing in 2003, notes ArsTechnica.

Incidentally, Microsoft sold debt that matures in 10 years at a yield of 2.413% last week, nearly the same rate as the lower-rated Apple.

Why does Apple need to pay money to investors?

ArsTechnica looks into this and concludes that Apple is catering to value and dividend investors, a demographic that "loves companies that hand out cash to shareholders, and debt is a perfectly acceptable source of financing for such policies."

Greenlight Capital Fund manager David Einhorn caused a stir earlier this year when he sued Apple over legislation that he believed would make it impossible for the company to issue preferred stock to shareholders. He should be happy about Apple's plans to return money to shareholders.

All this to avoid paying tax

AAPL closed at $442.78 last night, up from a low of $390.53 on 19 April.


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