Apple Inc. is about to join the ranks of the biggest U.S. corporate borrowers as the company starts marketing bonds in what it says may rival last April’s then-record $17 billion offering.

Apple Inc. is marketing a seven-piece bond offering in the U.S. as the iPhone maker seeks a cheaper alternative to reward shareholders than overseas cash that’s subject to repatriation taxes.

The company may sell notes as soon as today, according to a person with knowledge of the transaction. Apple plans to issue both floating- and fixed-rate notes with maturities of three and five years in addition to fixed-rate notes due in seven, 10 and 30 years, said the person, who asked not to be identified because terms aren’t set.

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 is considering buying part of today’s offering. “The market is giving them very cheap money.”

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 is returning 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 immediately 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. and Deere & Co., according to data compiled by Bloomberg.


Goldman Sachs

Deutsche Bank AG and Goldman Sachs Group Inc. are managing the offering for the Cupertino, California-based company, the person said. Proceeds will be used for general corporate purposes, including share repurchases and 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 may sell the three-year, fixed-rate debentures to yield about 20 basis points more than similar-maturity Treasuries, the five-year securities at a relative yield of about 40 basis points and the seven-year bonds at about 62.5 basis points, the person said. The 10-year notes may yield about an 80 basis-point spread and the 30-year debt 100.

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 paid $53.25 million in underwriter fees on the six-part offering, according to a regulatory filing at the time.

The 2023 bonds traded at 93.1 cents on the dollar to yield 3.29 percent 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 and compared with a 10-year average of 4.11 percent, Bank of America Merrill Lynch index data show. A basis point is 0.01 percentage point.

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.

Bloomberg News

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