Apple’s fund managers have received more than $3 billion in orders for its Australian dollar debt issuance in just over 24 hours.
Apple is offering a two-tranche bond sale of four- and seven-year notes in both fixed and floating formats.
The AFR reports on Friday morning $1 billion of the bids were for the four-year floating notes, $600 million was for the four-year fixed rate notes and $1.5 billion of the orders were for the seven-year bonds.
The bonds had an initial price guidance of 0.70 percentage points over the bank rate for the four-year bonds, with a yield of about 3%, and 1.15 percentage points over the swap rate for the seven-year bonds, with a yield of about 4%. The AFR reports pricing was moved in by 5 basis points to 0.65 percentage points after strong demand was registered.
Apple, which has a AA+ rating, will use the funds for corporate expenses, including share buy-backs, working capital, debt repayments, acquisitions and dividend payments.
Analysts are forecasting the tech giant, which has a market cap of about $US660 billion, could break the record for the largest international corporate bond issue sold in Australian dollars. The record is currently held by BHP which issued $1 billion worth of five year bonds in October 2012.
It has been reported Apple is offering the Kangaroo Bonds as a way to spread risk and hedge against currency moves. Since May 2013 Apple has raised $US50 billion in debt and has gradually expanded its debt programme beyond US dollars to include euros, Swiss francs and yen.
CMC chief markets strategist Michael McCarthy says while the bonds are only available to institutional investors at this stage, having such a high profile company launch an Australian dollar bonds is “good news” especially as there’s a longer term trend towards bond investments.
“Bringing international bonds to Australia is a very smart move, particularly if they can be reshaped to hit the retail bond market,” he said.
McCarthy explained that up until 2007 there was “almost zero allocations to bonds for individuals” because it was hard to buy them. But since the GFC bonds have been brought back to life and there’s been growing demand from SMSFs and mum and dad investors.
There have also been a number of groups emerge, like FIIG Securities, which sell bonds to retail investors. The major banks are also gearing up to sell them to individual clients.
FIIG Securities CEO Mark Paton told Business Insider there are now $1 trillion worth of bonds on issue in Australia, the majority of which are over the counter. Global beer giant SABMiller recently raised $700 million in a five-year Australian corporate bond issue.
“When you see big corporations like SAB Miller and now Apple, issuing bonds in Australia it raises the profile of that as an asset class for all investors to access,” he said.
“It’s good for the bond market that high profile names have come in and raised the profile of bonds as an asset class because it still has a relatively low profile.”
Apple’s order books closed on Friday morning and final pricing is expected later today.
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