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Aug 15, 2017

Apple sells $2.5B worth of bonds in Canada to fund stock buybacks

The Apple logo is pictured on an iPhone in an illustration photo taken in Bordeaux, France

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Apple Inc. (AAPL.O) sold $2.5 billion of seven-year bonds in Canada to fund stock buybacks and dividends in the biggest single debt offering by a foreign issuer in Canadian dollars.

The technology firm sold the senior unsecured bonds Tuesday with a 2.513 per cent coupon, priced to yield 81.4 basis points over the government benchmark, according to data compiled by Bloomberg. Apple had targeted a minimum size of $1.5 billion at a spread of about 83 basis points, plus or minus three basis points, according to people familiar with the matter who asked not to be identified.

This is the first Canadian bond sale for Apple and the largest single-tranche deal in Canada’s Maple bond market, topping Anheuser-Busch InBev’s $2 billion two-part sale in May. This has been the busiest year since 2007 for foreign issuers selling debt in Canadian dollars, with about $12.7 billion raised, according to Bloomberg data. Technology companies have been active debt issuers globally, including a debut bond from Tesla Inc. on Aug. 11, and a US$16 billion sale Tuesday from Inc.

“To be able to buy an issuer of this quality and a well-known entity in Canadian dollars is a very easy decision for most investors to make,” Bradley Meiers, managing director and head of debt syndication at HSBC Bank Canada, said in an interview.

Requests for comment with Apple weren’t returned.

It’s Apple’s sixth trip to the bond market this year after it issued US$18 billion in the U.S. in three sales. It also sold US$1 billion in Taiwan and offered euro-denominated notes. The company said in its earnings report Aug. 1 that revenue will be US$49 billion to US$52 billion in the three months through September, compared with analysts’ average forecast of US$49.1 billion. The outlook -- along with increasing sales of other products and services -- calmed investor concern that demand for iPhones was stagnating ahead of the company’s launch of its new models, sending shares soaring to record highs.

International corporate issuers such as AT&T Inc., PepsiCo Inc., and United Parcel Service Inc. have been capitalizing on competitive pricing in the Canadian-dollar bond market this year, driven by still-low interest rates and an investor search for yield and diversity. Maple bonds are securities in Canadian dollars offered by foreign companies.

“It’s a still a very attractive rate environment for issuers, especially if you think rates will continue to go higher,” Meiers said. “We’re in a really good spot now for issuer and investor.”

S&P Global Ratings assigned an AA+ rating to the Cupertino, California-based company’s new issue. HSBC, Royal Bank of Canada, Bank of Montreal and Goldman Sachs Group Inc. are managing the sale, according to the filing.

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