Apple issued $2.25b Kangaroo Bond Smashes Records

Apple has priced a $2.25 billion Kangaroo bond issue, smashing the record for the largest corporate bond issue in Australia.

The global technology giant set the terms on the four-year and seven-year bonds on Friday after attracting almost $3 billion of orders from fixed income funds, when order books were opened on Thursday morning.

Apple printed $1.1 billion of four-year fixed and floating bonds at a margin of 65 basis points over the bank rate or a yield of 2.88 per cent, and $1.15 billion of seven-year bonds at 115 basis points over the bank rate, or 3.71 per cent.

The pricing guidance was moved in by 5 basis points in light of the strong demand on both the four and seven-year tranches. Apple’s banks, Goldman Sachs, Commonwealth Bank and Deutsche Bank managed the sale on behalf of the Californian-based maker of the iPhone.

The deal is also the largest ever Kangaroo corporate bond. The Kangaroo bond is a term for bonds sold by foreign entities into the Australian dollar market.

Meanwhile, the $1.15 billion, seven-year tranche surpassed BHP Billiton’s record for the largest-ever tranche of a corporate bond offer, making the Apple bond the market’s largest on all accounts.

Apple has a AA+ credit rating, two notches higher than the AA- ratings of the major banks and one notch below the AAA credit rating of the Australian government.

The deal is seen as a major endorsement of Australia’s corporate bond market, which has at times struggled to lure the world’s largest companies.

Apple, which has so far raised $US50 billion ($68 billion) of debt since May 2013, has a cash balance of more than $US200 billion, but since most of the funds are in overseas jurisdictions, it borrows money to return funds to shareholders to avoid paying a large tax bill.

As the company’s funding task grows, it is seeking to diversify into new markets including Australia. About 89 per cent of Apple’s cash is held outside the US.

The company said the proceeds were intended for “general corporate purposes” including share buybacks, dividend payments and to fund working capital, capital expenditure, acquisitions and debt repayments.