Apple Returns to Bond Market - Wall Street Journal
Updated April 29, 2014 10:01 p.m. ET
Apple Inc. AAPL +0.41% Apple Inc. U.S.: Nasdaq $594.75 +2.42 +0.41% April 30, 2014 10:27 am Volume (Delayed 15m) : 2.13M P/E Ratio 14.12 Market Cap $510.22 Billion Dividend Yield 2.21% Rev. per Employee $2,187,330 04/30/14 Data Point: Tablets Cooled Dow... 04/30/14 The Morning Ledger: EBay Bites... 04/29/14 Intuit in Talks to Buy Mobile-... More quote details and news » completed its second blockbuster bond sale in a year, tapping robust investor demand that has propelled corporate debt in 2014 to a larger gain than U.S. stocks.
Cupertino, Calif.-based Apple sold $12 billion of debt of varying maturities at interest rates that were mostly less than a percentage point above comparable U.S. Treasury debt, highlighting widespread faith in the iPhone maker's prospects. Investors flocked to the offering, placing more than $40 billion in orders.
The company sold the debt a week after expanding its share buyback and increasing its dividend in a bid to reward shareholders. The tech firm sold a then-corporate-record $17 billion of debt last April. At $512 billion, Apple is the most valuable U.S. firm by stock-market value.
Tuesday's sale comes at a time when returns on investments perceived as safe are low and the economy is expanding at an uneven pace.
"The bonds are an attractive alternative to Treasury bonds," said Chuck Burge, head of U.S. investment-grade credit at Invesco, who planned to spend $100 million on the new Apple bonds. "Apple is a brand name everyone knows about."
The demand for Apple's bonds, which are rated double-A-plus, the second-highest rating, reflects a corporate-debt market that is putting in a surprisingly strong performance this year. Bond investments broadly declined last year amid investor expectations that the U.S. economy would pick up steam.
The total return for high-grade corporate bonds is 4.03% this year, according to Barclays, compared with a total return of 1.76% for the S&P 500. Total returns reflect changes in price and interest or dividend payments.
U.S. high-grade corporate debt now is yielding just 1.01 percentage points more than U.S. Treasurys, for the first time since 2007, and down from 1.14 percentage points at the end of last year. Narrower spreads generally reflect higher prices.
Just last week, analysts at Barclays said they expected bonds from investment-grade companies to return 1.50 to 2.00 percentage points more than Treasurys, up from the 1.25 to 1.75 points they forecast in December.
The gains show how large U.S. companies continue to reap the fruits of an economic expansion that is in its fifth year and low interest rates thanks in part to the Federal Reserve's easy-money policy.
"A lot of it is driven by the fact that fundamentally, these companies, they're still doing quite well," said Shobhit Gupta, a credit strategist at Barclays.
With the $12 billion sale, Apple becomes the latest company to sell bonds to pay for share buybacks and dividends, effectively raising money from bond investors and giving it to shareholders.
This year, companies such as Gilead Sciences Inc. and AutoZone Inc. sold bonds and said proceeds could be used for share repurchases.
While Apple still has a healthy cash pile—it reported about $150 billion in cash and securities at the end of March—some investors fear that selling bonds to reward shareholders can ding the value of a company's outstanding debt.
"Over the next 10 years, can Apple keep the iPhone relevant and a leading product?" said Leon Burger, a senior credit analyst at Principal Global Investors.
But Mr. Burger's firm put in an order for the debt on Tuesday. He pointed out that Apple's cash pile helps assuage any significant concerns, at least for now, and that Apple debt has so far lagged behind the rest of the market, so "there seems to be more value in Apple bonds."
Apple's bond deal last year remains the second largest on record, after a $49 billion sale last September by Verizon Communications Inc., VZ -0.16% Verizon Communications Inc. U.S.: NYSE $46.70 -0.07 -0.16% April 30, 2014 10:27 am Volume (Delayed 15m) : 2.37M P/E Ratio 10.41 Market Cap $193.67 Billion Dividend Yield 4.54% Rev. per Employee $689,751 04/29/14 Apple Returns to Bond Market 04/29/14 Holman Jenkins: How to Think A... 04/29/14 Sprint Loss Narrows, But Custo... More quote details and news » according to data provider Dealogic.
The bonds sold Tuesday offered interest rates relative to Treasurys that were similar to last year's sale. For example, a 10-year bond from Apple on Tuesday was priced to yield 0.77 percentage point more than comparable Treasurys. Last year, Apple priced 10-year bonds to yield 0.75 percentage point more.
In all, Apple sold fixed-rate bonds maturing in three, five, seven, 10 and 30 years, and were priced to yield 1.068%, 2.108%, 2.889%, 3.460% and 4.483%, respectively. Deutsche Bank AG and Goldman Sachs Group Inc. led the sale.
Apple also offered floating-rate bonds with three-year and five-year maturities, which were priced to yield 0.07 and 0.30 percentage point more than the three-month London interbank offered rate.
Apple's stock fell $1.76, or 0.3%, to $592.33, in 4 p.m. trading.
Not all investors dove into the new debt offering. Brian Pollak, a portfolio manager at Evercore Wealth Management, said his firm sat out the offering because he expected rates on Treasurys to still rise this year as the economy improves.
The yield on the 10-year Treasury note was at 2.695% late Tuesday, down from about 3% at the start of the year. It hit about 1.6% in May 2013, but yields rose when the Fed indicated it would soon start curtailing its bond-buying program.
The reversal underlined the risks always facing bond investors, Mr. Pollak said. "Last year, people started getting complacent about it, and then it kind of smashed everybody in the face," he said.
—Min Zeng contributed to this article.
Write to Mike Cherney at mike.cherney@wsj.com
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Apple Versus Samsung Case Goes to California Jury - ABC News
After listening to a month's worth of testimony from expert witnesses hired by Apple and Samsung as well as executives from each company, a Silicon Valley jury of four men and four women were tasked with sorting out the latest legal dispute over technology between the world's two largest smartphone makers.
Apple is demanding Samsung pay it $2.2 billion after accusing the South Korean company of infringing five software patents related to smartphones. Samsung denies the claims and counters that Apple owes it a little more than $6 million for infringing two of its patents.
The jury began deliberating late Tuesday and left at 4:30 p.m. PDT without reaching a verdict. The jurors are scheduled to resume deliberations Wednesday morning in San Jose.
A lawyer for Apple on Tuesday accused Samsung of copying key features of its iPhone and iPad products and demanded $2.2 billion in damages.
An attorney for Samsung denied the allegations and argued that its Google-developed software differs from Apple's operating system.
In his closing argument, lawyer William Price referred to an email from Apple founder Steve Jobs indicating that he had ordered employees to wage a "holy war" against Google and its Android system, believing it was a rip-off of Apple's operating system.
Price said that was the sole reason Apple filed the lawsuit against Samsung.
"We don't think we owe Apple a nickel," added John Quinn, one of four Samsung lawyers involved in the company's closing argument.
Quinn also said Apple wants to monopolize the industry.
"They want to attack Google and Android by attacking the most successful Android maker," he said.
Apple lawyer Harold McElhinny told jurors that Samsung's "illegal strategy has been wildly successful" and insisted that Google had nothing to do with the case.
"Despite all the times Samsung mentioned it, you will not find a single question about Google in your jury form," McElhinny said. "Google is not a defendant in this case."
Google spokesman Matt Kallman declined comment on the proceedings.
The four men and four women on the jury began deliberating later in the day.
The case marks the latest legal fight between Samsung and Apple as each tries to dominate the $330 billion annual market for smartphones.
Samsung has captured about 31 percent of the smartphone market while Apple retains a 15 percent share.
A different jury in San Jose presiding over a previous trial regarding older technology ordered Samsung to pay Apple $930 million. Samsung has appealed that ruling.
Google may not be a defendant in the current trial, but evidence introduced by Apple attorneys showed the Internet search giant has agreed to reimburse Samsung if the South Korean company is ordered to pay damages on two of the five patents at issue.
In addition, Samsung lawyers called three Google engineers to the witness stand to testify.
The trial involves five Apple patents that the company accuses Samsung of using to create nine newer smartphones and a tablet. The features in question include slide-to-lock, universal searching, quick linking, background syncing and automatic word correction.
Samsung, meanwhile, has alleged that Apple infringed two of its patents related to camera use and video transmission. Samsung is seeking $6.2 million in damages.
Jobs, who died in 2011, is a Silicon Valley legend revered for launching Apple in his family's garage in 1976. The Cupertino headquarters of the tech giant is a 15-mile (25-kilometer) drive from the San Jose federal courthouse where the patent case is playing.
Prospective jurors were closely questioned before the trial about connections and views about Apple, which employs about 80,000 workers worldwide.
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Apple Sells $12 Billion of Bonds to Keep Cash Overseas - Bloomberg
Apple Inc. (AAPL) issued $12 billion of dollar-denominated bonds as the iPhone maker seeking to reward shareholders locked in a cheaper alternative than overseas cash that’s subject to repatriation taxes.
The sale included $2.5 billion of 3.45 percent, 10-year notes that pay 77 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The spread was less than the approximately 90 basis points that was marketed earlier today, according to a person with knowledge of the transaction.
By taking on more debt, the world’s largest technology company by stock-market capitalization is sticking to its efforts to keep its U.S. tax bill low. Borrowing costs in the bond market are much lower than the levy on any money repatriated on Apple’s balance sheet that’s considered to be held overseas. Of the $151 billion Apple has in cash and marketable securities, about 88 percent is held offshore, the company said on an April 23 earnings call.
“They don’t want to pay the tax to bring it back to the U.S.,” said Matthew Duch, a fund manager at Calvert Investments in Bethesda, Maryland, which oversees more than $12 billion in assets, and was considering buying part of today’s offering. “The market is giving them very cheap money.”
International Expansion
The company’s strong growth and international expansion in recent years has built up “substantial offshore cash balances,” Luca Maestri, who will soon take over as Apple’s chief financial officer, said on the earnings call.
“To repatriate our foreign cash under current U.S. tax law, we would incur significant tax consequences and we don’t believe this would be in the best interest of our shareholders,” Maestri said.
Apple returned to debt markets to fund a $30 billion increase to its shareholder-reward program that also prompted its unprecedented $17 billion offering last year. Kristin Huguet, a company spokeswoman, didn’t return a call requesting comment on the sale.
The company said last week it will seek to raise an amount this year “similar” to what it issued in 2013. That would about double its debt load to put it within the 20 largest U.S. corporate borrowers excluding financial issuers and place it in the company of bond-market stalwarts Procter & Gamble Co. (PG) and Deere & Co., according to data compiled by Bloomberg.
Goldman Sachs
Deutsche Bank AG and Goldman Sachs Group Inc. managed the offering for the Cupertino, California-based company, said the person, who asked not to be identified, citing lack of authorization to speak publicly. Part of the proceeds will be used for dividend payments, Apple said today in a regulatory filing. The company said last week it will increase its quarterly dividend by about 8 percent.
Apple issued $2 billion of 2.1 percent, five-year securities at a relative yield of 37.5 basis points, Bloomberg data show. That’s down from about 50 basis points initially, according to the person.
The bonds are expected to be rated Aa1 by Moody’s Investors Service, Bloomberg data show.
The company sold $1.5 billion of 1.05 percent, three-year debentures to yield 18 basis points more than benchmarks, Bloomberg data show. The bonds were initially marketed at a spread of about 30 basis points, the person said.
The company also issued $3 billion of 2.85 percent, seven-year notes at 60 basis points, Bloomberg data show. That’s down from about 75 initially marketed, according to the person. The $1 billion of 4.45 percent, 30-year bonds paid 100 basis points, down from a range of 115 to 120.
The $1 billion each of three-year, floating-rate notes priced to yield 7 basis points more than the three-month London interbank offered rate, and five-year floaters paying a 30 basis-point spread. Libor, the rate at which banks say they can borrow from each other, was set today at 23 basis points, Bloomberg data show.
Borrowing Costs
Last April, Apple locked in borrowing costs that were near all-time lows. The deal’s largest piece, $5.5 billion of 10-year bonds, were sold with a 2.4 percent coupon to yield 75 basis points more than similar-maturity Treasuries, Bloomberg data show.
Goldman Sachs and Deutsche Bank also led that deal. Apple, which is rated AA+ by Standard & Poor’s, paid $53.25 million in underwriter fees on the six-part offering, according to a regulatory filing at the time.
The bonds due 2023 traded at 93.1 cents on the dollar to yield 3.29 percent at a spread of 62 basis points more than benchmarks yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Yields on AA rated, dollar-denominated securities reached 2.48 percent yesterday, up 52 basis points from a year ago, Bank of America Merrill Lynch index data show. A basis point is 0.01 percentage point.
Debt Load
Last year’s sale came more than nine years after the company cleared its balance sheet of bonds when the $300 million of 6.5 percent, 10-year notes it sold in February 1994 matured, Bloomberg data show.
Were Apple to double its $17 billion debt load, which ranks it as the 56th largest U.S. corporate issuer, it would rise to 16th, surging past Sprint Corp.’s $33 billion outstanding and less than P&G’s $36.4 billion and Deere’s $34.4 billion, Bloomberg data based on latest company filings show.
The figures compare with a median $9.4 billion among U.S. corporates with a market capitalization above $25 billion, Bloomberg data show. Apple’s leverage, or debt to earnings before interest, taxes, depreciation and amortization is 0.29 times, compared with a median 1.61 times.
Verizon Communications Inc.’s $49 billion offering in September unseated Apple’s 2013 deal as the largest offering on record, Bloomberg data show.
To contact the reporters on this story: Sarika Gangar in New York at sgangar@bloomberg.net; Matt Robinson in New York at mrobinson55@bloomberg.net
To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net John Parry
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Apple Returns to Bond Market - Wall Street Journal
Updated April 29, 2014 10:01 p.m. ET
Apple Inc. AAPL +0.35% Apple Inc. U.S.: Nasdaq $594.41 +2.08 +0.35% April 30, 2014 10:13 am Volume (Delayed 15m) : 1.70M P/E Ratio 14.07 Market Cap $510.22 Billion Dividend Yield 2.22% Rev. per Employee $2,187,330 04/30/14 Data Point: Tablets Cooled Dow... 04/30/14 The Morning Ledger: EBay Bites... 04/29/14 Intuit in Talks to Buy Mobile-... More quote details and news » completed its second blockbuster bond sale in a year, tapping robust investor demand that has propelled corporate debt in 2014 to a larger gain than U.S. stocks.
Cupertino, Calif.-based Apple sold $12 billion of debt of varying maturities at interest rates that were mostly less than a percentage point above comparable U.S. Treasury debt, highlighting widespread faith in the iPhone maker's prospects. Investors flocked to the offering, placing more than $40 billion in orders.
The company sold the debt a week after expanding its share buyback and increasing its dividend in a bid to reward shareholders. The tech firm sold a then-corporate-record $17 billion of debt last April. At $512 billion, Apple is the most valuable U.S. firm by stock-market value.
Tuesday's sale comes at a time when returns on investments perceived as safe are low and the economy is expanding at an uneven pace.
"The bonds are an attractive alternative to Treasury bonds," said Chuck Burge, head of U.S. investment-grade credit at Invesco, who planned to spend $100 million on the new Apple bonds. "Apple is a brand name everyone knows about."
The demand for Apple's bonds, which are rated double-A-plus, the second-highest rating, reflects a corporate-debt market that is putting in a surprisingly strong performance this year. Bond investments broadly declined last year amid investor expectations that the U.S. economy would pick up steam.
The total return for high-grade corporate bonds is 4.03% this year, according to Barclays, compared with a total return of 1.76% for the S&P 500. Total returns reflect changes in price and interest or dividend payments.
U.S. high-grade corporate debt now is yielding just 1.01 percentage points more than U.S. Treasurys, for the first time since 2007, and down from 1.14 percentage points at the end of last year. Narrower spreads generally reflect higher prices.
Just last week, analysts at Barclays said they expected bonds from investment-grade companies to return 1.50 to 2.00 percentage points more than Treasurys, up from the 1.25 to 1.75 points they forecast in December.
The gains show how large U.S. companies continue to reap the fruits of an economic expansion that is in its fifth year and low interest rates thanks in part to the Federal Reserve's easy-money policy.
"A lot of it is driven by the fact that fundamentally, these companies, they're still doing quite well," said Shobhit Gupta, a credit strategist at Barclays.
With the $12 billion sale, Apple becomes the latest company to sell bonds to pay for share buybacks and dividends, effectively raising money from bond investors and giving it to shareholders.
This year, companies such as Gilead Sciences Inc. and AutoZone Inc. sold bonds and said proceeds could be used for share repurchases.
While Apple still has a healthy cash pile—it reported about $150 billion in cash and securities at the end of March—some investors fear that selling bonds to reward shareholders can ding the value of a company's outstanding debt.
"Over the next 10 years, can Apple keep the iPhone relevant and a leading product?" said Leon Burger, a senior credit analyst at Principal Global Investors.
But Mr. Burger's firm put in an order for the debt on Tuesday. He pointed out that Apple's cash pile helps assuage any significant concerns, at least for now, and that Apple debt has so far lagged behind the rest of the market, so "there seems to be more value in Apple bonds."
Apple's bond deal last year remains the second largest on record, after a $49 billion sale last September by Verizon Communications Inc., VZ -0.21% Verizon Communications Inc. U.S.: NYSE $46.67 -0.10 -0.21% April 30, 2014 10:13 am Volume (Delayed 15m) : 1.78M P/E Ratio 10.42 Market Cap $193.67 Billion Dividend Yield 4.54% Rev. per Employee $689,751 04/29/14 Apple Returns to Bond Market 04/29/14 Holman Jenkins: How to Think A... 04/29/14 Sprint Loss Narrows, But Custo... More quote details and news » according to data provider Dealogic.
The bonds sold Tuesday offered interest rates relative to Treasurys that were similar to last year's sale. For example, a 10-year bond from Apple on Tuesday was priced to yield 0.77 percentage point more than comparable Treasurys. Last year, Apple priced 10-year bonds to yield 0.75 percentage point more.
In all, Apple sold fixed-rate bonds maturing in three, five, seven, 10 and 30 years, and were priced to yield 1.068%, 2.108%, 2.889%, 3.460% and 4.483%, respectively. Deutsche Bank AG and Goldman Sachs Group Inc. led the sale.
Apple also offered floating-rate bonds with three-year and five-year maturities, which were priced to yield 0.07 and 0.30 percentage point more than the three-month London interbank offered rate.
Apple's stock fell $1.76, or 0.3%, to $592.33, in 4 p.m. trading.
Not all investors dove into the new debt offering. Brian Pollak, a portfolio manager at Evercore Wealth Management, said his firm sat out the offering because he expected rates on Treasurys to still rise this year as the economy improves.
The yield on the 10-year Treasury note was at 2.695% late Tuesday, down from about 3% at the start of the year. It hit about 1.6% in May 2013, but yields rose when the Fed indicated it would soon start curtailing its bond-buying program.
The reversal underlined the risks always facing bond investors, Mr. Pollak said. "Last year, people started getting complacent about it, and then it kind of smashed everybody in the face," he said.
—Min Zeng contributed to this article.
Write to Mike Cherney at mike.cherney@wsj.com
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Apple Versus Samsung Case Goes to California Jury - ABC News
After listening to a month's worth of testimony from expert witnesses hired by Apple and Samsung as well as executives from each company, a Silicon Valley jury of four men and four women were tasked with sorting out the latest legal dispute over technology between the world's two largest smartphone makers.
Apple is demanding Samsung pay it $2.2 billion after accusing the South Korean company of infringing five software patents related to smartphones. Samsung denies the claims and counters that Apple owes it a little more than $6 million for infringing two of its patents.
The jury began deliberating late Tuesday and left at 4:30 p.m. PDT without reaching a verdict. The jurors are scheduled to resume deliberations Wednesday morning in San Jose.
A lawyer for Apple on Tuesday accused Samsung of copying key features of its iPhone and iPad products and demanded $2.2 billion in damages.
An attorney for Samsung denied the allegations and argued that its Google-developed software differs from Apple's operating system.
In his closing argument, lawyer William Price referred to an email from Apple founder Steve Jobs indicating that he had ordered employees to wage a "holy war" against Google and its Android system, believing it was a rip-off of Apple's operating system.
Price said that was the sole reason Apple filed the lawsuit against Samsung.
"We don't think we owe Apple a nickel," added John Quinn, one of four Samsung lawyers involved in the company's closing argument.
Quinn also said Apple wants to monopolize the industry.
"They want to attack Google and Android by attacking the most successful Android maker," he said.
Apple lawyer Harold McElhinny told jurors that Samsung's "illegal strategy has been wildly successful" and insisted that Google had nothing to do with the case.
"Despite all the times Samsung mentioned it, you will not find a single question about Google in your jury form," McElhinny said. "Google is not a defendant in this case."
Google spokesman Matt Kallman declined comment on the proceedings.
The four men and four women on the jury began deliberating later in the day.
The case marks the latest legal fight between Samsung and Apple as each tries to dominate the $330 billion annual market for smartphones.
Samsung has captured about 31 percent of the smartphone market while Apple retains a 15 percent share.
A different jury in San Jose presiding over a previous trial regarding older technology ordered Samsung to pay Apple $930 million. Samsung has appealed that ruling.
Google may not be a defendant in the current trial, but evidence introduced by Apple attorneys showed the Internet search giant has agreed to reimburse Samsung if the South Korean company is ordered to pay damages on two of the five patents at issue.
In addition, Samsung lawyers called three Google engineers to the witness stand to testify.
The trial involves five Apple patents that the company accuses Samsung of using to create nine newer smartphones and a tablet. The features in question include slide-to-lock, universal searching, quick linking, background syncing and automatic word correction.
Samsung, meanwhile, has alleged that Apple infringed two of its patents related to camera use and video transmission. Samsung is seeking $6.2 million in damages.
Jobs, who died in 2011, is a Silicon Valley legend revered for launching Apple in his family's garage in 1976. The Cupertino headquarters of the tech giant is a 15-mile (25-kilometer) drive from the San Jose federal courthouse where the patent case is playing.
Prospective jurors were closely questioned before the trial about connections and views about Apple, which employs about 80,000 workers worldwide.
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Apple Sells $12 Billion of Bonds to Keep Cash Overseas - Bloomberg
Apple Inc. (AAPL) issued $12 billion of dollar-denominated bonds as the iPhone maker seeking to reward shareholders locked in a cheaper alternative than overseas cash that’s subject to repatriation taxes.
The sale included $2.5 billion of 3.45 percent, 10-year notes that pay 77 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The spread was less than the approximately 90 basis points that was marketed earlier today, according to a person with knowledge of the transaction.
By taking on more debt, the world’s largest technology company by stock-market capitalization is sticking to its efforts to keep its U.S. tax bill low. Borrowing costs in the bond market are much lower than the levy on any money repatriated on Apple’s balance sheet that’s considered to be held overseas. Of the $151 billion Apple has in cash and marketable securities, about 88 percent is held offshore, the company said on an April 23 earnings call.
“They don’t want to pay the tax to bring it back to the U.S.,” said Matthew Duch, a fund manager at Calvert Investments in Bethesda, Maryland, which oversees more than $12 billion in assets, and was considering buying part of today’s offering. “The market is giving them very cheap money.”
International Expansion
The company’s strong growth and international expansion in recent years has built up “substantial offshore cash balances,” Luca Maestri, who will soon take over as Apple’s chief financial officer, said on the earnings call.
“To repatriate our foreign cash under current U.S. tax law, we would incur significant tax consequences and we don’t believe this would be in the best interest of our shareholders,” Maestri said.
Apple returned to debt markets to fund a $30 billion increase to its shareholder-reward program that also prompted its unprecedented $17 billion offering last year. Kristin Huguet, a company spokeswoman, didn’t return a call requesting comment on the sale.
The company said last week it will seek to raise an amount this year “similar” to what it issued in 2013. That would about double its debt load to put it within the 20 largest U.S. corporate borrowers excluding financial issuers and place it in the company of bond-market stalwarts Procter & Gamble Co. (PG) and Deere & Co., according to data compiled by Bloomberg.
Goldman Sachs
Deutsche Bank AG and Goldman Sachs Group Inc. managed the offering for the Cupertino, California-based company, said the person, who asked not to be identified, citing lack of authorization to speak publicly. Part of the proceeds will be used for dividend payments, Apple said today in a regulatory filing. The company said last week it will increase its quarterly dividend by about 8 percent.
Apple issued $2 billion of 2.1 percent, five-year securities at a relative yield of 37.5 basis points, Bloomberg data show. That’s down from about 50 basis points initially, according to the person.
The bonds are expected to be rated Aa1 by Moody’s Investors Service, Bloomberg data show.
The company sold $1.5 billion of 1.05 percent, three-year debentures to yield 18 basis points more than benchmarks, Bloomberg data show. The bonds were initially marketed at a spread of about 30 basis points, the person said.
The company also issued $3 billion of 2.85 percent, seven-year notes at 60 basis points, Bloomberg data show. That’s down from about 75 initially marketed, according to the person. The $1 billion of 4.45 percent, 30-year bonds paid 100 basis points, down from a range of 115 to 120.
The $1 billion each of three-year, floating-rate notes priced to yield 7 basis points more than the three-month London interbank offered rate, and five-year floaters paying a 30 basis-point spread. Libor, the rate at which banks say they can borrow from each other, was set today at 23 basis points, Bloomberg data show.
Borrowing Costs
Last April, Apple locked in borrowing costs that were near all-time lows. The deal’s largest piece, $5.5 billion of 10-year bonds, were sold with a 2.4 percent coupon to yield 75 basis points more than similar-maturity Treasuries, Bloomberg data show.
Goldman Sachs and Deutsche Bank also led that deal. Apple, which is rated AA+ by Standard & Poor’s, paid $53.25 million in underwriter fees on the six-part offering, according to a regulatory filing at the time.
The bonds due 2023 traded at 93.1 cents on the dollar to yield 3.29 percent at a spread of 62 basis points more than benchmarks yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Yields on AA rated, dollar-denominated securities reached 2.48 percent yesterday, up 52 basis points from a year ago, Bank of America Merrill Lynch index data show. A basis point is 0.01 percentage point.
Debt Load
Last year’s sale came more than nine years after the company cleared its balance sheet of bonds when the $300 million of 6.5 percent, 10-year notes it sold in February 1994 matured, Bloomberg data show.
Were Apple to double its $17 billion debt load, which ranks it as the 56th largest U.S. corporate issuer, it would rise to 16th, surging past Sprint Corp.’s $33 billion outstanding and less than P&G’s $36.4 billion and Deere’s $34.4 billion, Bloomberg data based on latest company filings show.
The figures compare with a median $9.4 billion among U.S. corporates with a market capitalization above $25 billion, Bloomberg data show. Apple’s leverage, or debt to earnings before interest, taxes, depreciation and amortization is 0.29 times, compared with a median 1.61 times.
Verizon Communications Inc.’s $49 billion offering in September unseated Apple’s 2013 deal as the largest offering on record, Bloomberg data show.
To contact the reporters on this story: Sarika Gangar in New York at sgangar@bloomberg.net; Matt Robinson in New York at mrobinson55@bloomberg.net
To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net John Parry
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Apple Returns to Bond Market - Wall Street Journal
Updated April 29, 2014 10:01 p.m. ET
Apple Inc. AAPL -0.01% Apple Inc. U.S.: Nasdaq $592.28 -0.05 -0.01% April 30, 2014 9:52 am Volume (Delayed 15m) : 841,247 P/E Ratio 14.11 Market Cap $510.22 Billion Dividend Yield 2.21% Rev. per Employee $2,187,330 04/30/14 Data Point: Tablets Cooled Dow... 04/30/14 The Morning Ledger: EBay Bites... 04/29/14 Intuit in Talks to Buy Mobile-... More quote details and news » completed its second blockbuster bond sale in a year, tapping robust investor demand that has propelled corporate debt in 2014 to a larger gain than U.S. stocks.
Cupertino, Calif.-based Apple sold $12 billion of debt of varying maturities at interest rates that were mostly less than a percentage point above comparable U.S. Treasury debt, highlighting widespread faith in the iPhone maker's prospects. Investors flocked to the offering, placing more than $40 billion in orders.
The company sold the debt a week after expanding its share buyback and increasing its dividend in a bid to reward shareholders. The tech firm sold a then-corporate-record $17 billion of debt last April. At $512 billion, Apple is the most valuable U.S. firm by stock-market value.
Tuesday's sale comes at a time when returns on investments perceived as safe are low and the economy is expanding at an uneven pace.
"The bonds are an attractive alternative to Treasury bonds," said Chuck Burge, head of U.S. investment-grade credit at Invesco, who planned to spend $100 million on the new Apple bonds. "Apple is a brand name everyone knows about."
The demand for Apple's bonds, which are rated double-A-plus, the second-highest rating, reflects a corporate-debt market that is putting in a surprisingly strong performance this year. Bond investments broadly declined last year amid investor expectations that the U.S. economy would pick up steam.
The total return for high-grade corporate bonds is 4.03% this year, according to Barclays, compared with a total return of 1.76% for the S&P 500. Total returns reflect changes in price and interest or dividend payments.
U.S. high-grade corporate debt now is yielding just 1.01 percentage points more than U.S. Treasurys, for the first time since 2007, and down from 1.14 percentage points at the end of last year. Narrower spreads generally reflect higher prices.
Just last week, analysts at Barclays said they expected bonds from investment-grade companies to return 1.50 to 2.00 percentage points more than Treasurys, up from the 1.25 to 1.75 points they forecast in December.
The gains show how large U.S. companies continue to reap the fruits of an economic expansion that is in its fifth year and low interest rates thanks in part to the Federal Reserve's easy-money policy.
"A lot of it is driven by the fact that fundamentally, these companies, they're still doing quite well," said Shobhit Gupta, a credit strategist at Barclays.
With the $12 billion sale, Apple becomes the latest company to sell bonds to pay for share buybacks and dividends, effectively raising money from bond investors and giving it to shareholders.
This year, companies such as Gilead Sciences Inc. and AutoZone Inc. sold bonds and said proceeds could be used for share repurchases.
While Apple still has a healthy cash pile—it reported about $150 billion in cash and securities at the end of March—some investors fear that selling bonds to reward shareholders can ding the value of a company's outstanding debt.
"Over the next 10 years, can Apple keep the iPhone relevant and a leading product?" said Leon Burger, a senior credit analyst at Principal Global Investors.
But Mr. Burger's firm put in an order for the debt on Tuesday. He pointed out that Apple's cash pile helps assuage any significant concerns, at least for now, and that Apple debt has so far lagged behind the rest of the market, so "there seems to be more value in Apple bonds."
Apple's bond deal last year remains the second largest on record, after a $49 billion sale last September by Verizon Communications Inc., VZ -0.28% Verizon Communications Inc. U.S.: NYSE $46.64 -0.13 -0.28% April 30, 2014 9:52 am Volume (Delayed 15m) : 806,583 P/E Ratio 10.43 Market Cap $193.67 Billion Dividend Yield 4.54% Rev. per Employee $689,751 04/29/14 Apple Returns to Bond Market 04/29/14 Holman Jenkins: How to Think A... 04/29/14 Sprint Loss Narrows, But Custo... More quote details and news » according to data provider Dealogic.
The bonds sold Tuesday offered interest rates relative to Treasurys that were similar to last year's sale. For example, a 10-year bond from Apple on Tuesday was priced to yield 0.77 percentage point more than comparable Treasurys. Last year, Apple priced 10-year bonds to yield 0.75 percentage point more.
In all, Apple sold fixed-rate bonds maturing in three, five, seven, 10 and 30 years, and were priced to yield 1.068%, 2.108%, 2.889%, 3.460% and 4.483%, respectively. Deutsche Bank AG and Goldman Sachs Group Inc. led the sale.
Apple also offered floating-rate bonds with three-year and five-year maturities, which were priced to yield 0.07 and 0.30 percentage point more than the three-month London interbank offered rate.
Apple's stock fell $1.76, or 0.3%, to $592.33, in 4 p.m. trading.
Not all investors dove into the new debt offering. Brian Pollak, a portfolio manager at Evercore Wealth Management, said his firm sat out the offering because he expected rates on Treasurys to still rise this year as the economy improves.
The yield on the 10-year Treasury note was at 2.695% late Tuesday, down from about 3% at the start of the year. It hit about 1.6% in May 2013, but yields rose when the Fed indicated it would soon start curtailing its bond-buying program.
The reversal underlined the risks always facing bond investors, Mr. Pollak said. "Last year, people started getting complacent about it, and then it kind of smashed everybody in the face," he said.
—Min Zeng contributed to this article.
Write to Mike Cherney at mike.cherney@wsj.com
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Apple Versus Samsung Case Goes to California Jury - ABC News
After listening to a month's worth of testimony from expert witnesses hired by Apple and Samsung as well as executives from each company, a Silicon Valley jury of four men and four women were tasked with sorting out the latest legal dispute over technology between the world's two largest smartphone makers.
Apple is demanding Samsung pay it $2.2 billion after accusing the South Korean company of infringing five software patents related to smartphones. Samsung denies the claims and counters that Apple owes it a little more than $6 million for infringing two of its patents.
The jury began deliberating late Tuesday and left at 4:30 p.m. PDT without reaching a verdict. The jurors are scheduled to resume deliberations Wednesday morning in San Jose.
A lawyer for Apple on Tuesday accused Samsung of copying key features of its iPhone and iPad products and demanded $2.2 billion in damages.
An attorney for Samsung denied the allegations and argued that its Google-developed software differs from Apple's operating system.
In his closing argument, lawyer William Price referred to an email from Apple founder Steve Jobs indicating that he had ordered employees to wage a "holy war" against Google and its Android system, believing it was a rip-off of Apple's operating system.
Price said that was the sole reason Apple filed the lawsuit against Samsung.
"We don't think we owe Apple a nickel," added John Quinn, one of four Samsung lawyers involved in the company's closing argument.
Quinn also said Apple wants to monopolize the industry.
"They want to attack Google and Android by attacking the most successful Android maker," he said.
Apple lawyer Harold McElhinny told jurors that Samsung's "illegal strategy has been wildly successful" and insisted that Google had nothing to do with the case.
"Despite all the times Samsung mentioned it, you will not find a single question about Google in your jury form," McElhinny said. "Google is not a defendant in this case."
Google spokesman Matt Kallman declined comment on the proceedings.
The four men and four women on the jury began deliberating later in the day.
The case marks the latest legal fight between Samsung and Apple as each tries to dominate the $330 billion annual market for smartphones.
Samsung has captured about 31 percent of the smartphone market while Apple retains a 15 percent share.
A different jury in San Jose presiding over a previous trial regarding older technology ordered Samsung to pay Apple $930 million. Samsung has appealed that ruling.
Google may not be a defendant in the current trial, but evidence introduced by Apple attorneys showed the Internet search giant has agreed to reimburse Samsung if the South Korean company is ordered to pay damages on two of the five patents at issue.
In addition, Samsung lawyers called three Google engineers to the witness stand to testify.
The trial involves five Apple patents that the company accuses Samsung of using to create nine newer smartphones and a tablet. The features in question include slide-to-lock, universal searching, quick linking, background syncing and automatic word correction.
Samsung, meanwhile, has alleged that Apple infringed two of its patents related to camera use and video transmission. Samsung is seeking $6.2 million in damages.
Jobs, who died in 2011, is a Silicon Valley legend revered for launching Apple in his family's garage in 1976. The Cupertino headquarters of the tech giant is a 15-mile (25-kilometer) drive from the San Jose federal courthouse where the patent case is playing.
Prospective jurors were closely questioned before the trial about connections and views about Apple, which employs about 80,000 workers worldwide.
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Apple Sells $12 Billion of Bonds to Keep Cash Overseas - Bloomberg
Apple Inc. (AAPL) issued $12 billion of dollar-denominated bonds as the iPhone maker seeking to reward shareholders locked in a cheaper alternative than overseas cash that’s subject to repatriation taxes.
The sale included $2.5 billion of 3.45 percent, 10-year notes that pay 77 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The spread was less than the approximately 90 basis points that was marketed earlier today, according to a person with knowledge of the transaction.
By taking on more debt, the world’s largest technology company by stock-market capitalization is sticking to its efforts to keep its U.S. tax bill low. Borrowing costs in the bond market are much lower than the levy on any money repatriated on Apple’s balance sheet that’s considered to be held overseas. Of the $151 billion Apple has in cash and marketable securities, about 88 percent is held offshore, the company said on an April 23 earnings call.
“They don’t want to pay the tax to bring it back to the U.S.,” said Matthew Duch, a fund manager at Calvert Investments in Bethesda, Maryland, which oversees more than $12 billion in assets, and was considering buying part of today’s offering. “The market is giving them very cheap money.”
International Expansion
The company’s strong growth and international expansion in recent years has built up “substantial offshore cash balances,” Luca Maestri, who will soon take over as Apple’s chief financial officer, said on the earnings call.
“To repatriate our foreign cash under current U.S. tax law, we would incur significant tax consequences and we don’t believe this would be in the best interest of our shareholders,” Maestri said.
Apple returned to debt markets to fund a $30 billion increase to its shareholder-reward program that also prompted its unprecedented $17 billion offering last year. Kristin Huguet, a company spokeswoman, didn’t return a call requesting comment on the sale.
The company said last week it will seek to raise an amount this year “similar” to what it issued in 2013. That would about double its debt load to put it within the 20 largest U.S. corporate borrowers excluding financial issuers and place it in the company of bond-market stalwarts Procter & Gamble Co. (PG) and Deere & Co., according to data compiled by Bloomberg.
Goldman Sachs
Deutsche Bank AG and Goldman Sachs Group Inc. managed the offering for the Cupertino, California-based company, said the person, who asked not to be identified, citing lack of authorization to speak publicly. Part of the proceeds will be used for dividend payments, Apple said today in a regulatory filing. The company said last week it will increase its quarterly dividend by about 8 percent.
Apple issued $2 billion of 2.1 percent, five-year securities at a relative yield of 37.5 basis points, Bloomberg data show. That’s down from about 50 basis points initially, according to the person.
The bonds are expected to be rated Aa1 by Moody’s Investors Service, Bloomberg data show.
The company sold $1.5 billion of 1.05 percent, three-year debentures to yield 18 basis points more than benchmarks, Bloomberg data show. The bonds were initially marketed at a spread of about 30 basis points, the person said.
The company also issued $3 billion of 2.85 percent, seven-year notes at 60 basis points, Bloomberg data show. That’s down from about 75 initially marketed, according to the person. The $1 billion of 4.45 percent, 30-year bonds paid 100 basis points, down from a range of 115 to 120.
The $1 billion each of three-year, floating-rate notes priced to yield 7 basis points more than the three-month London interbank offered rate, and five-year floaters paying a 30 basis-point spread. Libor, the rate at which banks say they can borrow from each other, was set today at 23 basis points, Bloomberg data show.
Borrowing Costs
Last April, Apple locked in borrowing costs that were near all-time lows. The deal’s largest piece, $5.5 billion of 10-year bonds, were sold with a 2.4 percent coupon to yield 75 basis points more than similar-maturity Treasuries, Bloomberg data show.
Goldman Sachs and Deutsche Bank also led that deal. Apple, which is rated AA+ by Standard & Poor’s, paid $53.25 million in underwriter fees on the six-part offering, according to a regulatory filing at the time.
The bonds due 2023 traded at 93.1 cents on the dollar to yield 3.29 percent at a spread of 62 basis points more than benchmarks yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Yields on AA rated, dollar-denominated securities reached 2.48 percent yesterday, up 52 basis points from a year ago, Bank of America Merrill Lynch index data show. A basis point is 0.01 percentage point.
Debt Load
Last year’s sale came more than nine years after the company cleared its balance sheet of bonds when the $300 million of 6.5 percent, 10-year notes it sold in February 1994 matured, Bloomberg data show.
Were Apple to double its $17 billion debt load, which ranks it as the 56th largest U.S. corporate issuer, it would rise to 16th, surging past Sprint Corp.’s $33 billion outstanding and less than P&G’s $36.4 billion and Deere’s $34.4 billion, Bloomberg data based on latest company filings show.
The figures compare with a median $9.4 billion among U.S. corporates with a market capitalization above $25 billion, Bloomberg data show. Apple’s leverage, or debt to earnings before interest, taxes, depreciation and amortization is 0.29 times, compared with a median 1.61 times.
Verizon Communications Inc.’s $49 billion offering in September unseated Apple’s 2013 deal as the largest offering on record, Bloomberg data show.
To contact the reporters on this story: Sarika Gangar in New York at sgangar@bloomberg.net; Matt Robinson in New York at mrobinson55@bloomberg.net
To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net John Parry
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Apple Returns to Bond Market - Wall Street Journal
Updated April 29, 2014 10:01 p.m. ET
Apple Inc. AAPL -0.03% Apple Inc. U.S.: Nasdaq $592.17 -0.16 -0.03% April 30, 2014 9:40 am Volume (Delayed 15m) : 0 P/E Ratio 14.07 Market Cap $510.22 Billion Dividend Yield 2.22% Rev. per Employee $2,187,330 04/30/14 The Morning Ledger: EBay Bites... 04/29/14 Intuit in Talks to Buy Mobile-... 04/29/14 Options Trades Canceled Due to... More quote details and news » completed its second blockbuster bond sale in a year, tapping robust investor demand that has propelled corporate debt in 2014 to a larger gain than U.S. stocks.
Cupertino, Calif.-based Apple sold $12 billion of debt of varying maturities at interest rates that were mostly less than a percentage point above comparable U.S. Treasury debt, highlighting widespread faith in the iPhone maker's prospects. Investors flocked to the offering, placing more than $40 billion in orders.
The company sold the debt a week after expanding its share buyback and increasing its dividend in a bid to reward shareholders. The tech firm sold a then-corporate-record $17 billion of debt last April. At $512 billion, Apple is the most valuable U.S. firm by stock-market value.
Tuesday's sale comes at a time when returns on investments perceived as safe are low and the economy is expanding at an uneven pace.
"The bonds are an attractive alternative to Treasury bonds," said Chuck Burge, head of U.S. investment-grade credit at Invesco, who planned to spend $100 million on the new Apple bonds. "Apple is a brand name everyone knows about."
The demand for Apple's bonds, which are rated double-A-plus, the second-highest rating, reflects a corporate-debt market that is putting in a surprisingly strong performance this year. Bond investments broadly declined last year amid investor expectations that the U.S. economy would pick up steam.
The total return for high-grade corporate bonds is 4.03% this year, according to Barclays, compared with a total return of 1.76% for the S&P 500. Total returns reflect changes in price and interest or dividend payments.
U.S. high-grade corporate debt now is yielding just 1.01 percentage points more than U.S. Treasurys, for the first time since 2007, and down from 1.14 percentage points at the end of last year. Narrower spreads generally reflect higher prices.
Just last week, analysts at Barclays said they expected bonds from investment-grade companies to return 1.50 to 2.00 percentage points more than Treasurys, up from the 1.25 to 1.75 points they forecast in December.
The gains show how large U.S. companies continue to reap the fruits of an economic expansion that is in its fifth year and low interest rates thanks in part to the Federal Reserve's easy-money policy.
"A lot of it is driven by the fact that fundamentally, these companies, they're still doing quite well," said Shobhit Gupta, a credit strategist at Barclays.
With the $12 billion sale, Apple becomes the latest company to sell bonds to pay for share buybacks and dividends, effectively raising money from bond investors and giving it to shareholders.
This year, companies such as Gilead Sciences Inc. and AutoZone Inc. sold bonds and said proceeds could be used for share repurchases.
While Apple still has a healthy cash pile—it reported about $150 billion in cash and securities at the end of March—some investors fear that selling bonds to reward shareholders can ding the value of a company's outstanding debt.
"Over the next 10 years, can Apple keep the iPhone relevant and a leading product?" said Leon Burger, a senior credit analyst at Principal Global Investors.
But Mr. Burger's firm put in an order for the debt on Tuesday. He pointed out that Apple's cash pile helps assuage any significant concerns, at least for now, and that Apple debt has so far lagged behind the rest of the market, so "there seems to be more value in Apple bonds."
Apple's bond deal last year remains the second largest on record, after a $49 billion sale last September by Verizon Communications Inc., VZ -0.19% Verizon Communications Inc. U.S.: NYSE $46.68 -0.09 -0.19% April 30, 2014 9:40 am Volume (Delayed 15m) : 0 P/E Ratio 10.44 Market Cap $193.67 Billion Dividend Yield 4.53% Rev. per Employee $689,751 04/29/14 Apple Returns to Bond Market 04/29/14 Holman Jenkins: How to Think A... 04/29/14 Sprint Loss Narrows, But Custo... More quote details and news » according to data provider Dealogic.
The bonds sold Tuesday offered interest rates relative to Treasurys that were similar to last year's sale. For example, a 10-year bond from Apple on Tuesday was priced to yield 0.77 percentage point more than comparable Treasurys. Last year, Apple priced 10-year bonds to yield 0.75 percentage point more.
In all, Apple sold fixed-rate bonds maturing in three, five, seven, 10 and 30 years, and were priced to yield 1.068%, 2.108%, 2.889%, 3.460% and 4.483%, respectively. Deutsche Bank AG and Goldman Sachs Group Inc. led the sale.
Apple also offered floating-rate bonds with three-year and five-year maturities, which were priced to yield 0.07 and 0.30 percentage point more than the three-month London interbank offered rate.
Apple's stock fell $1.76, or 0.3%, to $592.33, in 4 p.m. trading.
Not all investors dove into the new debt offering. Brian Pollak, a portfolio manager at Evercore Wealth Management, said his firm sat out the offering because he expected rates on Treasurys to still rise this year as the economy improves.
The yield on the 10-year Treasury note was at 2.695% late Tuesday, down from about 3% at the start of the year. It hit about 1.6% in May 2013, but yields rose when the Fed indicated it would soon start curtailing its bond-buying program.
The reversal underlined the risks always facing bond investors, Mr. Pollak said. "Last year, people started getting complacent about it, and then it kind of smashed everybody in the face," he said.
—Min Zeng contributed to this article.
Write to Mike Cherney at mike.cherney@wsj.com
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Apple Versus Samsung Case Goes to California Jury - ABC News
After listening to a month's worth of testimony from expert witnesses hired by Apple and Samsung as well as executives from each company, a Silicon Valley jury of four men and four women were tasked with sorting out the latest legal dispute over technology between the world's two largest smartphone makers.
Apple is demanding Samsung pay it $2.2 billion after accusing the South Korean company of infringing five software patents related to smartphones. Samsung denies the claims and counters that Apple owes it a little more than $6 million for infringing two of its patents.
The jury began deliberating late Tuesday and left at 4:30 p.m. PDT without reaching a verdict. The jurors are scheduled to resume deliberations Wednesday morning in San Jose.
A lawyer for Apple on Tuesday accused Samsung of copying key features of its iPhone and iPad products and demanded $2.2 billion in damages.
An attorney for Samsung denied the allegations and argued that its Google-developed software differs from Apple's operating system.
In his closing argument, lawyer William Price referred to an email from Apple founder Steve Jobs indicating that he had ordered employees to wage a "holy war" against Google and its Android system, believing it was a rip-off of Apple's operating system.
Price said that was the sole reason Apple filed the lawsuit against Samsung.
"We don't think we owe Apple a nickel," added John Quinn, one of four Samsung lawyers involved in the company's closing argument.
Quinn also said Apple wants to monopolize the industry.
"They want to attack Google and Android by attacking the most successful Android maker," he said.
Apple lawyer Harold McElhinny told jurors that Samsung's "illegal strategy has been wildly successful" and insisted that Google had nothing to do with the case.
"Despite all the times Samsung mentioned it, you will not find a single question about Google in your jury form," McElhinny said. "Google is not a defendant in this case."
Google spokesman Matt Kallman declined comment on the proceedings.
The four men and four women on the jury began deliberating later in the day.
The case marks the latest legal fight between Samsung and Apple as each tries to dominate the $330 billion annual market for smartphones.
Samsung has captured about 31 percent of the smartphone market while Apple retains a 15 percent share.
A different jury in San Jose presiding over a previous trial regarding older technology ordered Samsung to pay Apple $930 million. Samsung has appealed that ruling.
Google may not be a defendant in the current trial, but evidence introduced by Apple attorneys showed the Internet search giant has agreed to reimburse Samsung if the South Korean company is ordered to pay damages on two of the five patents at issue.
In addition, Samsung lawyers called three Google engineers to the witness stand to testify.
The trial involves five Apple patents that the company accuses Samsung of using to create nine newer smartphones and a tablet. The features in question include slide-to-lock, universal searching, quick linking, background syncing and automatic word correction.
Samsung, meanwhile, has alleged that Apple infringed two of its patents related to camera use and video transmission. Samsung is seeking $6.2 million in damages.
Jobs, who died in 2011, is a Silicon Valley legend revered for launching Apple in his family's garage in 1976. The Cupertino headquarters of the tech giant is a 15-mile (25-kilometer) drive from the San Jose federal courthouse where the patent case is playing.
Prospective jurors were closely questioned before the trial about connections and views about Apple, which employs about 80,000 workers worldwide.
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Apple Sells $12 Billion of Bonds to Keep Cash Overseas - Bloomberg
Apple Inc. (AAPL) issued $12 billion of dollar-denominated bonds as the iPhone maker seeking to reward shareholders locked in a cheaper alternative than overseas cash that’s subject to repatriation taxes.
The sale included $2.5 billion of 3.45 percent, 10-year notes that pay 77 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. The spread was less than the approximately 90 basis points that was marketed earlier today, according to a person with knowledge of the transaction.
By taking on more debt, the world’s largest technology company by stock-market capitalization is sticking to its efforts to keep its U.S. tax bill low. Borrowing costs in the bond market are much lower than the levy on any money repatriated on Apple’s balance sheet that’s considered to be held overseas. Of the $151 billion Apple has in cash and marketable securities, about 88 percent is held offshore, the company said on an April 23 earnings call.
“They don’t want to pay the tax to bring it back to the U.S.,” said Matthew Duch, a fund manager at Calvert Investments in Bethesda, Maryland, which oversees more than $12 billion in assets, and was considering buying part of today’s offering. “The market is giving them very cheap money.”
International Expansion
The company’s strong growth and international expansion in recent years has built up “substantial offshore cash balances,” Luca Maestri, who will soon take over as Apple’s chief financial officer, said on the earnings call.
“To repatriate our foreign cash under current U.S. tax law, we would incur significant tax consequences and we don’t believe this would be in the best interest of our shareholders,” Maestri said.
Apple returned to debt markets to fund a $30 billion increase to its shareholder-reward program that also prompted its unprecedented $17 billion offering last year. Kristin Huguet, a company spokeswoman, didn’t return a call requesting comment on the sale.
The company said last week it will seek to raise an amount this year “similar” to what it issued in 2013. That would about double its debt load to put it within the 20 largest U.S. corporate borrowers excluding financial issuers and place it in the company of bond-market stalwarts Procter & Gamble Co. (PG) and Deere & Co., according to data compiled by Bloomberg.
Goldman Sachs
Deutsche Bank AG and Goldman Sachs Group Inc. managed the offering for the Cupertino, California-based company, said the person, who asked not to be identified, citing lack of authorization to speak publicly. Part of the proceeds will be used for dividend payments, Apple said today in a regulatory filing. The company said last week it will increase its quarterly dividend by about 8 percent.
Apple issued $2 billion of 2.1 percent, five-year securities at a relative yield of 37.5 basis points, Bloomberg data show. That’s down from about 50 basis points initially, according to the person.
The bonds are expected to be rated Aa1 by Moody’s Investors Service, Bloomberg data show.
The company sold $1.5 billion of 1.05 percent, three-year debentures to yield 18 basis points more than benchmarks, Bloomberg data show. The bonds were initially marketed at a spread of about 30 basis points, the person said.
The company also issued $3 billion of 2.85 percent, seven-year notes at 60 basis points, Bloomberg data show. That’s down from about 75 initially marketed, according to the person. The $1 billion of 4.45 percent, 30-year bonds paid 100 basis points, down from a range of 115 to 120.
The $1 billion each of three-year, floating-rate notes priced to yield 7 basis points more than the three-month London interbank offered rate, and five-year floaters paying a 30 basis-point spread. Libor, the rate at which banks say they can borrow from each other, was set today at 23 basis points, Bloomberg data show.
Borrowing Costs
Last April, Apple locked in borrowing costs that were near all-time lows. The deal’s largest piece, $5.5 billion of 10-year bonds, were sold with a 2.4 percent coupon to yield 75 basis points more than similar-maturity Treasuries, Bloomberg data show.
Goldman Sachs and Deutsche Bank also led that deal. Apple, which is rated AA+ by Standard & Poor’s, paid $53.25 million in underwriter fees on the six-part offering, according to a regulatory filing at the time.
The bonds due 2023 traded at 93.1 cents on the dollar to yield 3.29 percent at a spread of 62 basis points more than benchmarks yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Yields on AA rated, dollar-denominated securities reached 2.48 percent yesterday, up 52 basis points from a year ago, Bank of America Merrill Lynch index data show. A basis point is 0.01 percentage point.
Debt Load
Last year’s sale came more than nine years after the company cleared its balance sheet of bonds when the $300 million of 6.5 percent, 10-year notes it sold in February 1994 matured, Bloomberg data show.
Were Apple to double its $17 billion debt load, which ranks it as the 56th largest U.S. corporate issuer, it would rise to 16th, surging past Sprint Corp.’s $33 billion outstanding and less than P&G’s $36.4 billion and Deere’s $34.4 billion, Bloomberg data based on latest company filings show.
The figures compare with a median $9.4 billion among U.S. corporates with a market capitalization above $25 billion, Bloomberg data show. Apple’s leverage, or debt to earnings before interest, taxes, depreciation and amortization is 0.29 times, compared with a median 1.61 times.
Verizon Communications Inc.’s $49 billion offering in September unseated Apple’s 2013 deal as the largest offering on record, Bloomberg data show.
To contact the reporters on this story: Sarika Gangar in New York at sgangar@bloomberg.net; Matt Robinson in New York at mrobinson55@bloomberg.net
To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net John Parry
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Apple Returns to Bond Market - Wall Street Journal
Updated April 29, 2014 10:01 p.m. ET
Apple Inc. AAPL -0.30% Apple Inc. U.S.: Nasdaq $592.33 -1.76 -0.30% April 29, 2014 4:00 pm Volume (Delayed 15m) : 11.83M AFTER HOURS $590.00 -2.33 -0.39% April 29, 2014 7:59 pm Volume (Delayed 15m): 216,044 P/E Ratio 14.07 Market Cap $510.22 Billion Dividend Yield 2.22% Rev. per Employee $2,187,330 04/30/14 The Morning Ledger: EBay Bites... 04/29/14 Intuit in Talks to Buy Mobile-... 04/29/14 Options Trades Canceled Due to... More quote details and news » completed its second blockbuster bond sale in a year, tapping robust investor demand that has propelled corporate debt in 2014 to a larger gain than U.S. stocks.
Cupertino, Calif.-based Apple sold $12 billion of debt of varying maturities at interest rates that were mostly less than a percentage point above comparable U.S. Treasury debt, highlighting widespread faith in the iPhone maker's prospects. Investors flocked to the offering, placing more than $40 billion in orders.
The company sold the debt a week after expanding its share buyback and increasing its dividend in a bid to reward shareholders. The tech firm sold a then-corporate-record $17 billion of debt last April. At $512 billion, Apple is the most valuable U.S. firm by stock-market value.
Tuesday's sale comes at a time when returns on investments perceived as safe are low and the economy is expanding at an uneven pace.
"The bonds are an attractive alternative to Treasury bonds," said Chuck Burge, head of U.S. investment-grade credit at Invesco, who planned to spend $100 million on the new Apple bonds. "Apple is a brand name everyone knows about."
The demand for Apple's bonds, which are rated double-A-plus, the second-highest rating, reflects a corporate-debt market that is putting in a surprisingly strong performance this year. Bond investments broadly declined last year amid investor expectations that the U.S. economy would pick up steam.
The total return for high-grade corporate bonds is 4.03% this year, according to Barclays, compared with a total return of 1.76% for the S&P 500. Total returns reflect changes in price and interest or dividend payments.
U.S. high-grade corporate debt now is yielding just 1.01 percentage points more than U.S. Treasurys, for the first time since 2007, and down from 1.14 percentage points at the end of last year. Narrower spreads generally reflect higher prices.
Just last week, analysts at Barclays said they expected bonds from investment-grade companies to return 1.50 to 2.00 percentage points more than Treasurys, up from the 1.25 to 1.75 points they forecast in December.
The gains show how large U.S. companies continue to reap the fruits of an economic expansion that is in its fifth year and low interest rates thanks in part to the Federal Reserve's easy-money policy.
"A lot of it is driven by the fact that fundamentally, these companies, they're still doing quite well," said Shobhit Gupta, a credit strategist at Barclays.
With the $12 billion sale, Apple becomes the latest company to sell bonds to pay for share buybacks and dividends, effectively raising money from bond investors and giving it to shareholders.
This year, companies such as Gilead Sciences Inc. and AutoZone Inc. sold bonds and said proceeds could be used for share repurchases.
While Apple still has a healthy cash pile—it reported about $150 billion in cash and securities at the end of March—some investors fear that selling bonds to reward shareholders can ding the value of a company's outstanding debt.
"Over the next 10 years, can Apple keep the iPhone relevant and a leading product?" said Leon Burger, a senior credit analyst at Principal Global Investors.
But Mr. Burger's firm put in an order for the debt on Tuesday. He pointed out that Apple's cash pile helps assuage any significant concerns, at least for now, and that Apple debt has so far lagged behind the rest of the market, so "there seems to be more value in Apple bonds."
Apple's bond deal last year remains the second largest on record, after a $49 billion sale last September by Verizon Communications Inc., VZ +0.36% Verizon Communications Inc. U.S.: NYSE $46.77 +0.17 +0.36% April 29, 2014 4:00 pm Volume (Delayed 15m) : 15.22M AFTER HOURS $46.79 +0.02 +0.04% April 29, 2014 6:33 pm Volume (Delayed 15m): 334,600 P/E Ratio 10.44 Market Cap $193.67 Billion Dividend Yield 4.53% Rev. per Employee $689,751 04/29/14 Apple Returns to Bond Market 04/29/14 Holman Jenkins: How to Think A... 04/29/14 Sprint Loss Narrows, But Custo... More quote details and news » according to data provider Dealogic.
The bonds sold Tuesday offered interest rates relative to Treasurys that were similar to last year's sale. For example, a 10-year bond from Apple on Tuesday was priced to yield 0.77 percentage point more than comparable Treasurys. Last year, Apple priced 10-year bonds to yield 0.75 percentage point more.
In all, Apple sold fixed-rate bonds maturing in three, five, seven, 10 and 30 years, and were priced to yield 1.068%, 2.108%, 2.889%, 3.460% and 4.483%, respectively. Deutsche Bank AG and Goldman Sachs Group Inc. led the sale.
Apple also offered floating-rate bonds with three-year and five-year maturities, which were priced to yield 0.07 and 0.30 percentage point more than the three-month London interbank offered rate.
Apple's stock fell $1.76, or 0.3%, to $592.33, in 4 p.m. trading.
Not all investors dove into the new debt offering. Brian Pollak, a portfolio manager at Evercore Wealth Management, said his firm sat out the offering because he expected rates on Treasurys to still rise this year as the economy improves.
The yield on the 10-year Treasury note was at 2.695% late Tuesday, down from about 3% at the start of the year. It hit about 1.6% in May 2013, but yields rose when the Fed indicated it would soon start curtailing its bond-buying program.
The reversal underlined the risks always facing bond investors, Mr. Pollak said. "Last year, people started getting complacent about it, and then it kind of smashed everybody in the face," he said.
—Min Zeng contributed to this article.
Write to Mike Cherney at mike.cherney@wsj.com
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Apple Versus Samsung Case Goes to California Jury - ABC News
After listening to a month's worth of testimony from expert witnesses hired by Apple and Samsung as well as executives from each company, a Silicon Valley jury of four men and four women were tasked with sorting out the latest legal dispute over technology between the world's two largest smartphone makers.
Apple is demanding Samsung pay it $2.2 billion after accusing the South Korean company of infringing five software patents related to smartphones. Samsung denies the claims and counters that Apple owes it a little more than $6 million for infringing two of its patents.
The jury began deliberating late Tuesday and left at 4:30 p.m. PDT without reaching a verdict. The jurors are scheduled to resume deliberations Wednesday morning in San Jose.
A lawyer for Apple on Tuesday accused Samsung of copying key features of its iPhone and iPad products and demanded $2.2 billion in damages.
An attorney for Samsung denied the allegations and argued that its Google-developed software differs from Apple's operating system.
In his closing argument, lawyer William Price referred to an email from Apple founder Steve Jobs indicating that he had ordered employees to wage a "holy war" against Google and its Android system, believing it was a rip-off of Apple's operating system.
Price said that was the sole reason Apple filed the lawsuit against Samsung.
"We don't think we owe Apple a nickel," added John Quinn, one of four Samsung lawyers involved in the company's closing argument.
Quinn also said Apple wants to monopolize the industry.
"They want to attack Google and Android by attacking the most successful Android maker," he said.
Apple lawyer Harold McElhinny told jurors that Samsung's "illegal strategy has been wildly successful" and insisted that Google had nothing to do with the case.
"Despite all the times Samsung mentioned it, you will not find a single question about Google in your jury form," McElhinny said. "Google is not a defendant in this case."
Google spokesman Matt Kallman declined comment on the proceedings.
The four men and four women on the jury began deliberating later in the day.
The case marks the latest legal fight between Samsung and Apple as each tries to dominate the $330 billion annual market for smartphones.
Samsung has captured about 31 percent of the smartphone market while Apple retains a 15 percent share.
A different jury in San Jose presiding over a previous trial regarding older technology ordered Samsung to pay Apple $930 million. Samsung has appealed that ruling.
Google may not be a defendant in the current trial, but evidence introduced by Apple attorneys showed the Internet search giant has agreed to reimburse Samsung if the South Korean company is ordered to pay damages on two of the five patents at issue.
In addition, Samsung lawyers called three Google engineers to the witness stand to testify.
The trial involves five Apple patents that the company accuses Samsung of using to create nine newer smartphones and a tablet. The features in question include slide-to-lock, universal searching, quick linking, background syncing and automatic word correction.
Samsung, meanwhile, has alleged that Apple infringed two of its patents related to camera use and video transmission. Samsung is seeking $6.2 million in damages.
Jobs, who died in 2011, is a Silicon Valley legend revered for launching Apple in his family's garage in 1976. The Cupertino headquarters of the tech giant is a 15-mile (25-kilometer) drive from the San Jose federal courthouse where the patent case is playing.
Prospective jurors were closely questioned before the trial about connections and views about Apple, which employs about 80,000 workers worldwide.
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