Record low interest is the catalyst fuelling bond issuance among corporations. Companies are increasingly taking advantage of the reduced cost of borrowing to raise capital in the bond market, to finance various projects as well as pay underlying debt. Apple Inc. (NASDAQ:AAPL) is the latest to tap the bond market.
Apple $14 Billion Bond
The tech giant has sold $14 billion worth of bonds taking advantage of the cheap borrowing costs amid the record low-interest rates. The latest capital-raising spree is part of the companies push to access cheap capital as it looks to return cash to shareholders. Likewise, Apple issued debt in six parts, with the longest portion being 40-year security that will yield 95 points above treasuries.
Until as late as 2020, Apple had never ventured into the U.S market to raise capital given the high cost of borrowing on the FED raising interest rates. In the aftermath of the COVID-19 pandemic, the central bank was forced to cut interest rates, which has significantly lowered borrowing costs.
Rock bottom interest rates have proved to be tempting for the most valuable company in the world, which is looking to bolster its share buyback program and dividend program. Part of the bond offering proceeds will also go towards working capital, capital expenditures, and acquisitions. Part of it could also go towards debt repayment.
PetroTal $100 Million Bond
Apple is not the only company to take advantage of the record low-interest rate, fuelling corporate bond issuance. PetroTal has also completed a 3-year $100 million senior secured bond offering with a fixed coupon of 12%.
PetroTal will use net proceeds from the offering to repay all existing and outstanding loans. It also intends to use net proceeds to provide support for crude oil hedging transactions, finance potential acquisitions. The bond offering should also strengthen n the company’s liquidity, which should allow it to return to development activity at the Bretana oil field.
Cathay Pacific Eyes $870 Million On Bonds
Raising capital through bond offerings is gathering pace in the wake of Central banks cutting interest rates. Hong Kong Cathay Pacific airline is the latest to show strong interest in tapping the bond markets. The airline is looking to raise as much as $870 million via bond issuance.
The airline has seen its financial base take a significant hit in the pandemic’s aftermath taking a toll on air travel. Flying a fraction of the passengers it did in 2019, the cash burn rate has remained at elevated levels of $190 million, with no relief in sight.
The Hong Kong flagship airline is to issue five-year bonds paying 2.75% annually. The offering should allow the airline to raise HK$6.74 billion or $870 million. The bonds are convertible. Conversely, holders can swap them for Cathay Pacific shares.
Pharmaceutical giant Orexo is also in the process of tapping the bond markets. The Company has engaged the services of ABG Sundal Collier AB as it looks to issue a series of unsecured callable floating rate bonds to a tune of SEK 500 million with a tenor of four years.