Apple raises $5.5 billion in debt after upbeat earnings, iPhone sales offset fears of consumer pushback

Apple Inc., which just reported upbeat quarterly results tied to strong iPhone sales, launched a four-part bond deal on Monday to raise new debt.

Apple’s new AAPL agreement,
-0.62%
raised $5.5 billion for the tech giant through the issuance of four series of bonds rated AAA by Moody’s Investors Service and AA+ by S&P Global, according to Informa Global Markets.

This size reached the expected range of $4 billion to $6.5 billion, signaling healthy demand for Apple’s debt deal. Fresh supply may be lukewarm in the last month of summer for bond issuance.

“Even though August is generally a slower issuing month,” said Tom Murphy, head of investment grade credit at Columbia Threadneedle Investments, “we believe this year could be busier.”

Murphy pointed to improving conditions for borrowers over the past month, but also continued macroeconomic uncertainties as potential catalysts for more robust issuance by well-rated US companies in August.

The U.S. investment grade bond index hit a negative 11.6% annual total return through the end of July, an improvement from its negative 16.1% annual performance in mid-June, it said. -he declares.

Robust iPhone sales have also been a bright spot in quarterly corporate earnings so far, with some Wall Street analysts calling Apple’s earnings “resilient” amid soaring gasoline prices, groceries, vehicles, housing and more.

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Signs of a surge in consumer demand were found in previous quarterly results from Walmart Inc. WMT,
+0.37%
and others. Companies like Facebook parent company Meta Platforms Inc. META,
+0.52%
also signaled falling incomes as U.S. households juggle soaring costs and fears of recession as the Federal Reserve struggles to rein in inflation at its highest level in four decades.

For investors, Apple’s debt deal, split across 7-year, 10-year, 30-year and 40-year bond classes, came after a historically poor start to 2022 that left many companies will trade at deep discounts.

The bonds were priced at more attractive levels for Apple, relative to previous price talk, another sign of healthy demand from investors. The bonds cleared at a price range of 63 to 118 basis points above the TMUBMUSD10Y risk-free Treasury rate,
2.572%,
according to Informa Global Markets.

Initial price talk was 90 basis points to 150 basis points above the benchmark, according to a report from CreditSights, which also noted that iPhones accounted for 52% of Apple’s sales over the past 12 months until the third fiscal quarter.

Proceeds from the sale of bonds will be used by Apple for general corporate purposes, including stock and bond buybacks and dividend payments.

Apple did not immediately respond to a request for comment.

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