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Market Extra: Apple raises $5.5 billion in debt after upbeat earnings, iPhone sales offset fears of a consumer pullback

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Apple Inc., fresh off upbeat quarterly results tied to robust iPhone sales, rolled out a four-part bond deal on Monday to raise new debt.

The new deal from Apple
AAPL,
-0.62%

raised $5.5 billion for the technology giant through the issuance of four series of bonds with ratings of AAA from Moody’s Investors Service and AA+ from S&P Global, according to Informa Global Markets.

That size hit in the anticipated range of $4 billion to $6.5 billion, signaling healthy demand for the Apple debt deal. Fresh supply can be tepid in the final month of summer for bond issuance.

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

Murphy pointed to improved conditions for borrowers in the past month, but also ongoing macro uncertainties as potential catalysts for more robust issuance from highly rated U.S. companies in August.

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

Robust iPhone sales also have been a bright spot of quarterly corporate earnings so far, with some Wall Street analysts dubbing Apple’s earnings “resilient” in the face of soaring prices for gas, groceries, vehicles, shelter and more.

Read: Big Tech survived the earnings test, but many more tech companies are picking up their pencils

Signs of buckling consumer demand were found in earlier quarterly results from Walmart Inc.
WMT,
+0.37%

and others. Companies like Facebook parent Meta Platforms Inc.
META,
+0.52%

also reported declining revenue as U.S. households juggle soaring costs and recession fears as the Federal Reserve works to tame inflation running at a four-decade high.

For investors, the Apple debt deal, split across 7-year, 10-year, 30-year and 40-year classes of bonds, came after a historically bad start to 2022 that has left many corporate bonds trading with steep discounts.

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

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

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

Apple didn’t immediately respond to a request for comment.

The Tell: JP Morgan quant who called summer rebound in stocks says rally could continue even if corporate profits decline

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