Investors Want Apple's Paper
Last seven months notwithstanding, equity investors had been piling into Apple for years looking to get a piece of its growth. That fervor sent shares to the all-time high of $705 last September. Apple has matured a lot in just the last seven months, which includes a dramatic diversification of its investor base.
Not only has Apple's equity investor base begun to transition from growth-seekers to income-seekers, but the company is also now preparing to add some bond investors to its mix -- and bond investors are dying to get some of Apple's paper.
Over the past two days, Apple has filed a shelf registration statement and prospectus in preparation of today's six-part bond offering. There will be four tranches of fixed rate notes accompanied by two floating rate tranches for shorter terms.
The floaters will be tied to three-month LIBOR, which is currently 0.28%. The exact total of the offering is still up in the air, but various reports are estimating it in the range of $15 billion to $16 billion. However, the total order book heading into the offering has reportedly reached over $40 billion, meaning there is significant interest in Apple debt.
There's a distinct possibility that the bond offering will become the largest domestic investment-grade bond offering ever, topping the prior record of $16.5 billion from Roche Holdings in 2009.
Apple carries the same credit rating as the U.S. government, and new issues typically price with a spread over Treasury yields. Apple's debt will technically be just as creditworthy as Uncle Sam's (although less creditworthy than Microsoft as far as the ratings agencies are concerned), but will yield more than comparable Treasuries.
By day's end, Apple may be able to add some more superlatives to its belt: "We just conducted the largest ever domestic bond offering to fund the largest single share repurchase authorization ever."
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The article Investors Want Apple's Paper originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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