Apple planning six-part bond sale that may approach record

Price Guidance

Apple’s floating debt due 2016 may pay about 10 basis points, or 0.1 percentage point, more than the three-month London interbank offered rate, with the five-year floater potentially yielding 30 basis points more than the benchmark, according to a person familiar with the offering.

The fixed-rate, three-year debt may pay 25 basis points more than similar-maturity Treasuries; the five-year notes may have a relative yield of 45 basis points; the 10-year securities may have a spread of 80 basis points and the 30-year bonds may pay 105, said the person, who asked not to be identified because terms aren’t set.

Libor, the rate at which banks say they can borrow in dollars from each other, was set at 0.273 percentage points today.


While Apple’s $145 billion of cash is more than the combined funds of every AAA rated U.S. company including Microsoft, it failed to win the bond market’s highest credit grade from Moody’s Investors Service and Standard & Poor’s. Moody’s rated the firm Aa1 with S&P giving it a grade of AA+.

That rating tier is “inconsistent” with Apple’s credit risk, according to Fitch Ratings, which yesterday said the company’s “significant liquidity cushion” was overshadowed by the threat of volatile consumer preferences, significant competition and rapid technology changes. While Fitch hasn’t released a public grade for Apple, it said such a ranking would likely fall “at the highest end” of the single-A tier, lower than where Moody’s and S&P graded the debt.

Microsoft, along with Johnson & Johnson, Exxon Mobil Corp. and Automatic Data Processing Inc., is rated Aaa by Moody’s and AAA at S&P.

Concern that Apple’s pace of sales growth is slowing were reinforced last week by a forecast for narrowing gross margins and sales this quarter that may miss analysts’ predictions by as much as $4.9 billion. Apple had its first profit decline in a decade last quarter amid accelerating competition in mobile devices from Samsung Electronics Co.

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