New issues in U.S. corporate bond markets topped $36 billion last week, with at least two companies borrowing and one company planning to borrow while their balance sheets are loaded with cash. Here are a few of the highlights.
There will be one more way to get a bite of Apple Inc. (NASDAQ:AAPL) soon. The company released a new plan to return capital to shareholders, including a dividend raise and a $50 billion increase in its share repurchase authorization. According to the press release, “In conjunction with the expanded return of capital program, the Company plans to borrow and expects to announce more details about this in the near future.” Given Apple Inc. (NASDAQ:AAPL)’s huge cash balance and profitable operations, expect the bonds to price with very low yields when they are announced. At the new dividend rate, the debt service will probably cost less than the dividend payouts on repurchased stock.
Microsoft Corporation (NASDAQ:MSFT) entered “AAA” for credit rating and output coupon rates of 1%, 2.375%, and 3.75% for the company’s $1.95 billion of five-, 10-, and 30-year notes. The “Use of Proceeds” statement in the SEC filing told of “funding for working capital, capital expenditures, repurchases of our capital stock, acquisitions and repayment of our existing debt.” A search at FINRA turned up $1 billion of debt maturing this September. With a current dividend yield of 2.9%, the payout savings from share buybacks would be more than the debt service costs on 10-year and shorter-maturity paper. Like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) has enough cash on its balance sheet that it doesn’t need to borrow. The company also issued 550 million euros in 20-year notes last week.
NIKE, Inc. (NYSE:NKE) joined the debt game with $1 billion split between 10- and 30-year paper. According to the “Use of Proceeds” statement, the money is going toward “discharging or refinancing of debt, working capital, capital expenditures, share repurchases, as yet unplanned acquisitions of assets or businesses and investments in subsidiaries.” The company’s latest balance sheet only shows $361 million in debt, so that leaves plenty for the other uses. Like the two big tech companies, NIKE, Inc. (NYSE:NKE) has enough current assets that it shouldn’t need to borrow.
Adult-beverage producer Diageo plc (ADR) (NYSE:DEO) poured out $3.25 billion in four shots with maturities ranging from three- to 30-years. The money is being used to repay 1.15 billion euros of 5.5% debt and some commercial paper. The move should save Diageo plc (ADR) (NYSE:DEO) about $15 million per year.