Cisco tapped the market for $13.5bn across 7-tranches of senior notes in the largest technology debt financing thus far in 2024. The transaction was significantly oversubscribed, with an order book exceeding $50bn. Cisco’s rating are A1/AA- and the Company’s last issuance was in September of 2016. IBM’s bond issuance on January 30th initially broke the Tech dry spell, having issued a 7-tranche debt offering of $5.5 billion of senior notes. Intel and now Cisco have followed, continuing the rejuvenation of Tech issuance. Intel issued a $2,55 billion 3-tranche deal on February 15th. The deal was comprised of $500mm of 7-year notes, $900m of 10-year notes and $1.15 billion of 30-year notes. See term sheet: Intel February 15, 2024 Transaction Term Sheet. Intel’s last debt issuance was on February 7th, 2023 when the Company tapped the market for $11bn in a 7-tranche offering.
Other Tech companies remain to be seen. Apple was last in the market on May 8th, when the Company completed a $5.25bn offering of 3-, 5-, 7-, 10- and 30-year notes. As a comparison, Apple’s issuance in May included a 10-year coupon of 4.3%.
Apple is known for its market timing. The 10- and 30-year Treasuries, for example, were 3.51% and 3.82%, respectively, at the time of the May offering. Treasury yields are still approximately +50 basis points higher today. The Company has $10.9bn maturing in 2024 and $34.5bn maturing in 2024-2026. The Company’s reported cash balance of $162bn will allow Apple to continue its opportunistic approach to debt issuance.
Amazon has the second-largest debt maturities in 2024 and 2024-2026. The Company has not issued in the debt markets since 11/29/22. The 2022 transaction, $8.25bn in total, was comprised of 2-, 3-, 5-, 7- and 10-year senior notes. The yield on the 10-year Treasury note at the time of that offering was 3.75%.
Maturities in 2024 are light for large-cap tech names, yet 2024-2026 maturities in aggregate are $73bn in total.
Broadcom’s acquisition of VMWare has now closed, and many expect the Company to launch a sizable bond offering in Q1. The Company secured a $28bn term loan in August to refinance the $32bn bridge put into place at the time of the acquisition. Broadcom was also upgraded to BBB by S&P after the closing, while Moody’s revised its outlook to positive.
Tech issuers can often take an opportunistic approach to debt issuance due to significant cash balances. The market will watch for the next Tech company to make its move given the rally in Treasuries. Market sentiment will be driven by the economic outlook, which is becoming more constructive as we enter 2024. Economic Prospects in Review
Relatedly, Broadcom will eventually proceed to refinance its $28bn in-term loans in the bond market. Apple and others will continue to be opportunistic, and today’s market can certainly be described as such. With IBM’s bond issuance kicking off the Tech sector’s 2024 debt activity and Intel following, we will soon see which Tech issuer is next up.
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