Apple, Inc. Just Raised $5 Billion More in Debt

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Less than a month after tapping the Canadian bond market for the first time, Apple (NASDAQ: AAPL) is back for more. The Mac maker just sold another $5 billion in debt to boost its domestic cash position further in order to fund its aggressive capital-return program. The latest offering of notes range in maturity from two years to 30 years.

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This comes just days before the company is preparing to unveil its highly anticipated 10th-generation iPhone next week at its new Apple Park campus.

Only fixed-rate notes this time

This time around, Apple is going with fixed notes, in contrast with prior offerings that also included floaters. Apple was considering a floating-rate tranche, but decided to stick with fixed-rate notes, according to Bloomberg. Here's a quick breakdown of the tranches that made up the $5 billion offering:

Principle

Coupon

Maturity

$1 billion

1.5%

September 2019

$1 billion

2.1%

September 2022

$2 billion

2.9%

September 2027

$1 billion

3.75%

September 2047

Bloomberg also notes that Apple was able to obtain favorable pricing on the 2047 notes, citing an anonymous source. That paper is priced with a spread of 110 basis points over comparable Treasuries, better than the original spread of 125 basis points.

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Apple repurchased $7.5 billion worth of stock last quarter and paid out $3.4 billion in dividends and dividend equivalents. Add in another $0.9 billion for net share settlement, and the company returned a total of $11.7 billion last quarter. Total gross cash before factoring in debt at the end of June was $261.5 billion, but only $15.5 billion of that total is held domestically. Apple typically only allows its domestic cash position to fall to around $15 billion before bolstering it with debt.

There will be more

Total debt and commercial paper at the end of last quarter totaled $108.3 billion. Adding in the roughly $1.9 billion from the Canadian offering with this last batch of $5 billion should bring total debt to around $115.2 billion before considering any changes to Apple's outstanding commercial paper. Commercial paper is a more flexible short-term debt instrument that is often used to fund working capital, and does not require regulatory filings like term-debt offerings. Apple had nearly $12 billion in commercial paper outstanding at the end of last quarter.

Apple boosted its share repurchase authorization by $35 billion, to $210 billion in May, which is good through March 2019. Of that total authorization, the company had repurchased an astounding $158.5 billion through June. Unless that tax repatriation holiday ever comes to pass, investors should expect the Mac maker to keep piling on more debt to fund capital returns.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.