Apple raised $5.5 billion in debt after upbeat earnings, iPhone sales offset fears of consumer downturn

Apple Inc. introduced , optimistic new quarterly results tied to strong iPhone sales, a four-part bond deal on Monday to raise new debt.

The new deal from Apple AAPL,
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The tech giant has raised $5.5 billion by issuing four series of bonds rated AAA from Moody’s Investors Service and AA+ from S&P Global, according to Informa Global Markets.

This volume was in the expected range of $4 billion to $6.5 billion, indicating strong demand for Apple’s debt deal. The new offer could be tepid in the last month of summer for a bond issue.

“Although August is usually a slower issuance month, we appreciate that this year could be a busier one,” said Tom Murphy, head of investment grade credit at Columbia Threadneedle Investments.

Murphy cited improved conditions for borrowers in the past month, but also continued overall uncertainty as potential catalysts for a more robust issuance from top-rated US companies in August.

He said the US Bond Index rose to a negative 11.6% total annual return through the end of July, an improvement from the negative -16.1% annual performance in mid-June.

Strong iPhone sales have also been a bright spot in corporate quarterly earnings so far, with some Wall Street analysts describing Apple’s earnings as “resilient” in the face of higher prices for gas, groceries, vehicles, shelter and more.

ReadBig Tech survives earnings test, but many tech companies pick up pencils

Signs of a twist in consumer demand were found in Walmart Inc.’s previous quarterly results. WMT,
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and others. Companies like Facebook Meta Platforms Inc. META,
+ 0.52%
It also reported lower revenues as US households grapple with rising costs and recession fears as the Federal Reserve works to tame inflation that is at its highest level in four decades.

For investors, Apple’s debt deal, split into 7-year, 10-year, 30-year and 40-year bond classes, came after a historically poor start to 2022 that left many corporate bonds trading at deep discounts.

The bonds are priced at levels that are more attractive to Apple, versus earlier talk of prices, another sign of healthy demand from investors. The bonds were settled in a price range of 63 to 118 basis points above the treasury risk-free rate TMUBMUSD10Y,
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According to Informa Global Markets.

Initial price talk was 90 basis points to 150 basis points above the benchmark, according to a CreditSights report, which also noted that iPhones accounted for 52% of Apple’s sales in the past 12 months during the fiscal third quarter.

Apple will use the proceeds from the sale of the bonds for general corporate purposes, including the repurchase of shares and bonds and dividend payments.

Apple did not immediately respond to a request for comment.

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