Monday, February 9, 2015

Apple Plans Debut Swiss Franc Bond Sale


Apple Inc. is seeking to add to its recent run of blockbuster bond deals with a debut sale in Swiss francs, according to one of the banks arranging the offering.

Goldman Sachs Group Inc. and Credit Suisse Group AG have been hired to manage the potential sale, which could come as soon as Tuesday, a banker said.
 Apple Inc. is seeking to add to its recent run of blockbuster bond deals with a debut sale in Swiss francs, according to one....

Soaring demand for Swiss franc-denominated debt has sent government-bond yields into negative territory, meaning that investors are now willing to pay to lend Switzerland cash for as long as 10 years.

Those negative yields mean that Apple will also be able to borrow cheaply, because corporate bonds are typically linked to the price of government debt.

Last month, the Swiss central bank removed its long-standing cap on the strength of the franc against the euro, prompting the currency to rise sharply. The bank also lowered its deposit rate, boosting demand for corporate debt that pays comparatively higher yields.

“Given the current pricing on Apple deals and where Swiss government bonds are, any new Swiss-franc deal is likely to price with an extremely low funding cost,” said Chris Telfer, a specialist portfolio manager at ECM Asset Management in London. Mr. Telfer declined to say whether his firm would consider buying an Apple bond denominated in Swiss francs.

The maturity of Apple’s proposed deal hasn’t been decided but a short-dated bond could be sold with a negative yield—a first for a corporate bond issued in Europe.

Last week, the yields on Swiss food maker NestlĂ© ’s short-term euro debt turned negative in secondary trading, a relatively new phenomenon for a corporate bond, following a swath of eurozone government debt from Germany to Finland whose yields have tumbled below 0%.

Investors say Apple may consider a 10-year or 15-year bond, meaning that the yield would probably be lower than 0.5 percentage point. The company sold $6.5 billion of dollar bonds last week as it continues to raise cash from debt sales to help fund dividend payments and share buybacks.

“Much like in the euro market, we think retail demand for Apple bonds will be strong in the Swiss franc market,” said Thibault Colle, a credit strategist at UBS.