Apple planning six-part bond sale that may approach record

Returning Cash

Using new debt to finance Apple’s $55 billion addition to its plan to return cash to shareholders through 2015 with buybacks and dividends may require annual issuance of between $15 billion and $20 billion, Ping Zhao, an analyst at CreditSights Inc. in New York, wrote in a report April 23. Apple would probably receive a “very attractive rate” for as much as $50 billion in new debt, Barclays Plc analyst Ben Reitzes wrote in a report last month.

Apple’s debt sale is coming more than nine years after the company cleared its balance sheet of bonds when the $300 million of 6.5% 10-year notes it sold in February 1994 matured. Apple issued new convertible debt in 1996 that was called in 1999, Bloomberg data show.

Deal Cachet

Apple, which has had little need for Wall Street’s services since its 1980 initial public offering and the two bond deals in the 1990s, picked two underwriters with which it has had a deep history.

Goldman Sachs, which managed both bond deals in the 1990s, was hired by the company after last year’s shareholder meeting to help it improve transparency and governance, including what to do with its growing cash pile, according to people familiar with the decision. The bank has helped advise Apple’s board on ways to return cash to shareholders and respond to hedge fund manager David Einhorn, who began publicly demanding action, a person with knowledge of the plans said in February.

Goldman Sachs ranks first this year among managers of debt sales for technology companies, Bloomberg data show.

Deutsche Bank advised Apple on its 1997 takeover of Next Computer Inc., the deal that led to the return of Steve Jobs, Apple’s late co-founder.

While fees from managing the offering are probably small, the deal will carry prestige and size that can elevate underwriters in so-called league tables that Wall Street uses to claim bragging rights over peers, according to Jim Angel, a visiting professor at the University of Pennsylvania’s Wharton School.

“Whenever you have a very high-profile offering from a famous issuer that is a household name brand and it’s a big offering, everybody wants this because of the prestige angle,” Angel said. “The folks at Apple are no dummies, and I’m sure they’ll exploit their advantage to the maximum.”

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