Apple Files For 4-Part Debt Offering: Why Would The Tech Giant With Over $34B In Its Coffer Need Additional Finances?

Close on the heels of reporting strong quarterly results, Apple Inc AAPL, has filed for a debt offering.

What Happened: In a preliminary prospectus supplement filed with the SEC Thursday, Apple said it is planning a four-part note offering. The senior unsecured notes are due to mature in 2028, 2031, 2051 and 2061, respectively.

The company has left the terms of the offering unfilled, although it suggested interest on the notes are to be paid semi-annually in arrears, beginning in 2022.

Goldman Sachs, BofA Securities and Barclays will serve as joint book-running managers for the offerings.

Apple said in the filing it will use the net proceeds from the potential sale for funding working capital, capital expenditures, acquisitions and repayment of debt. The company also suggested it may temporarily invest funds that are not immediately needed for these purposes in short-term investments.

Related Link: How Apple Neutralized Any Short-Term Weakness The Market Was Anticipating

Apple Storing Up For Fueling Growth? Apple's cash and cash equivalents at the end of the June quarter were at $34.05 billion, a decline from $38.02 at the end of the March quarter.

Cupertino's highest cash balance was at the end of the June quarter of 2019, which boasted cash and cash equivalents of $50.53 billion.

The cash balance began to taper when the company resumed dividend payments in 2012 after a gap of about 17 years. In the same year, the company also initiated a buyback program.

Apple is operating in a capital-intensive industry, with huge investments made in exploratory projects and improving the technology of its current products. The funding needs are acute to keep its products and services ahead of the competition.

For some time now, Apple is also toying with its self-driving Apple Car project.

From the perspective of the cost of financing, debt funds are cheaper than equity financing. The time required to secure debt financing is less and the borrowing corporate may not be bound by more severe covenants.

Apple may also have been swayed by the prevailing extremely low interest rates. The Federal Reserve has maintained the Fed funds futures rate at a very accommodative level of 0.25% ever since the onset of the COVID-19 pandemic. Most lending rates are benchmarked on this key rate.

APPL Price Action: At last check Thursday, Apple shares were up 0.66% at $145.94.