The company borrows $5.5 billion while sitting on huge cash reserves. What will Apple do with the money?
The technology group Apple is a superlative corporation: in 2018, it became the first American company to reach a market capitalisation of one trillion dollars, and then two years later – again as the first company – to exceed a market capitalisation of 2 trillion dollars and now be worth more than 3 trillion dollars. The company employs more than 60,000 people around the world, and at times has had more financial reserves than the US government. Even today, Apple looks back on a proud $180 billion in cash assets. It is therefore surprising that such a company raises money on the bond market, as it has done in recent days.
Specifically, Apple borrowed $5.5 billion on Monday. The bonds are issued in four tranches with maturities between seven and 40 years. The interest rate is considered attractive, ranging from 63 to 118 basis points above the level of US government bonds. The rush for the papers was great. With a volume of 23 billion dollars, demand has exceeded supply many times over, as the Bloomberg agency, which specialises in financial news, reports with reference to people familiar with the matter. The money is to be used for general corporate purposes: That usually means share buybacks and dividend payments.
Apple still has a top rating and can finance itself cheaply: Moody’s rates its credit rating at the top Aaa, which is only achieved by Microsoft and Johnson & Johnson in the S&P 500. Apple naturally wants to take advantage of this. And the fact that Apple is borrowing billions is an expression of confidence in growing cash flows and not an operational need, at least according to Bloomberg expert Robert Schiffman. So Apple borrows money because it can, not because it has to.
The company is a repeat offender: it has already issued so-called green bonds several times – bonds that are intended to serve sustainable purposes. After all, Apple has also set itself the goal of becoming climate-neutral by 2030. Since 2016, the company has issued three green bonds, the last for the time being in 2019, with a total volume of 4.7 billion dollars. According to the Green Bond Impact Report, $3 billion of this is allocated to specific projects.
550 million dollars are distributed among 50 projects that revolve around energy efficiency and renewable energies. These projects are expected to lead to the saving of nearly 2.9 million tonnes of CO2, generate 1.854 million megawatt hours of clean energy annually, and provide 699 megawatts of newly installed renewable energy capacity.
One project revolves around “green” aluminium – that is, aluminium produced without CO2 emissions. The material was already used in some MacBook Pros in 2019 and will also be used in the iPhone. Another part of the green bonds was used to supply a data centre of Apple near the Danish city of Viborg with energy from a wind farm – the surplus electricity is then fed into the Danish power grid. The server centre is to be further expanded so that the heat given off is captured and can be used.