Apple is going to test Australia’s once-derided corporate debt market, giving domestic institutions and superannuation funds a coveted chance to lend to the world’s biggest and most profitable company ever. Apple has already raised funds in the yen, Swiss franc and euro and of course U.S. dollars with the aim of enhancing shareholders’ returns.
All for magnifying shareholders’ return
The Commonwealth Bank, Deutsche Bank and Goldman Sachs have scheduled investor calls to detail bond managers on the “Apple credit” on Tuesday before the bond issue, says a report from SMH.
Apple, which has over $200 billion in cash, with the majority stashed outside the U.S., has been facing pressure from high-profile activist investors like Carl Icahn and David Einhorn to give more money to shareholders. But due to U.S. taxation rules, the company is finding it difficult to repatriate this cash. So, to return money to shareholders in the form of dividends and buybacks, the iPhone maker borrows money via the debt markets. A few months ago, Apple said it would return $200 billion to shareholders by March 2017.
Apple has invested some of its cash in Australia via Reno, Nev.,-based asset management firm Braeburn Capital, which is among the biggest buyers of Australian bank commercial paper for sale in the U.S.
Apple bond a positive sign for Australian bond market
For a long time, Apple’s treasury team has been keenly watching the Australian bond market developments with a view of diversifying the company’s debt book. The move may have been inspired by SABMiller’s recent $700 million bond sale in Australia. Other global firms that have tapped Australia’s debt market are BP, Glencore and BHP Billiton.
Apple’s looking to Australia for funds can be seen as a major boost for the domestic bond market, which previously has been criticized for being too small. Speaking on the development, Aberdeen Asset Management’s head of Asia Pacific credit research, John Mannings told SMH that it is really good the “global champions” are seeing Australia as a potential funding destination, adding, “Apple should offer good diversification for local investors, but I am sure there will be interest through the Asia Pacific region.”
Currently, Standard & Poor’s has a AA+ rating on Apple, while Moody’s has assigned the U.S. firm a rating of Aa1. Apple’s rating is two notches better than the Commonwealth Bank but one notch below the Australian government’s AAA credit rating.