NEW YORK - Apple wowed the debt markets yesterday with the largest non-bank bond deal in history, pricing a whopping (US$17 billion) S$20 billion as the US computer giant switches strategy to placate restless shareholders.
Just a week after announcing its first drop in quarterly earnings in a decade, Apple came to market with the massive deal to raise funds for an ambitious programme that will return US$100 billion in cash to holders of Apple shares.
Sources said investors could barely submit orders fast enough to get in on the deal from Apple, the only major tech company without a single penny of debt on its books.
The six-part all-dollar offering attracted more than US$50 billion of orders by midday in New York - a massive level of demand even in the current red-hot climate of the bond markets.
"Apple made its intentions clear that this deal is for shareholder-friendly activity, but they have tremendous metrics and brand recognition," Mr Rajeev Sharma, portfolio manager at First Investors Management, told IFR.
"Apple is something everyone wants in their portfolio."
The US$17 billion size easily trumps the previous biggest single deal according to Thomson Reuters/IFR data, a US$14.7 billion deal from Abbott Laboratories spin-off AbbVie last November.
Earlier, a source said potential investors had been told yesterday that this would be Apple's only bond deal of the year, apparently scuttling hopes of possible euro or sterling issues - and helping fuel demand for Tuesday's mega-deal, which was led by Deutsche Bank and Goldman Sachs.
The massive deal caps a milestone week for Apple, which in seven days has changed tack to satisfy its investor base, becoming the world's biggest dividend payer and recapturing its mantle as the world's largest company by stock market value at US$413 billion.
Investors unhappy with Chief Executive Tim Cook's previous reluctance to share any of Apple's massive US$145 billion cash pile with shareholders - and unimpressed by its diminishing prospects for earnings growth - had been relentless sellers of Apple's stock since its share price topped out above US$705 in late September.
The stock tumbled more than 45 per cent from Sept 21 to April 19, falling by roughly US$320 per share.
But the stock has rallied more than 12 per cent in the past 10 days as a new class of income-oriented investor, enticed by its dividend yield of nearly 3 per cent, snaps up shares. They rose more than 3 per cent on Tuesday to over US$444.
Although the company has a staggering US$145 billion in cash, only US$45 billion of that is readily available in the United States - meaning Apple needs to raise about US$60 billion over the next three years to fund the shareholder capital return plan.
Analysts suggest that hitting the debt markets now makes sense with interest rates - and thus the cost of raising funds - near record lows.