Apple's Aussie bonds could raise $1 billion

Australia's corporate bond market is poised for a big boost as US tech giant Apple prepares its first Kangaroo bond.

The world's largest company by market value has made a habit of shattering global bond records since its US$17 billion debut debt offering in May 2013, and market participants are predicting another big deal.

"I'm expecting at least a AU$500 million trade but AU$1 billion would not surprise given the huge local and regional appetite for Apple paper," said a syndicate banker not involved in the transaction.

Apple is to begin investor calls today ahead of the potential debut Kangaroo, the name given to bonds from foreign issuers in the Australian market.

A big local issue from Aa1/AA+ rated Apple would highlight the appeal of the Australian dollar market for the world's largest corporate issuers.

Apple's move comes after SABMiller, the world's second-largest brewer by revenue, showed on 31 July there is plenty of depth in the Australian corporate bond market for the right name at the right price.

The A3/A- rated global drinks maker, which produces Australian favourites Foster's and Victoria Bitter among its collection, raised an impressive AU$700 million from its first offering of Australian dollar 5-year medium-term notes.

Domestic institutional investors, who had been starved of corporate paper in recent months, bought the majority of the bond.

The SABMiller trade was seen as a significant breakthrough for the Kangaroo market, which is dominated by banks and sovereign, supranational and agency issuers.

Underpinned by the world's fourth-biggest pension pool, the Kangaroo market has long been an important funding alternative for international banks and SSAs, but efforts to extend that to global corporate issuers have mostly disappointed.

Only mining giant BHP Billiton has sold a larger Australian dollar corporate bond, equalling its own AU$1 billion record with 19 March's domestic five-year print.

Apple diversifies

Although the SABMiller issue, through FBG Treasury (Aust), was technically a domestic corporate offering, investors treated it as a rare corporate Kangaroo because its global parent is the guarantor. Excluding deals from local subsidiaries, the largest Kangaroo bond from a non-financial issuer stands at AU$500 million.

Even AU$1 billion, equivalent to US$735 million at the current exchange rate, would be modest by Apple's standards.

The US technology company has sold bonds in Swiss francs, yen and sterling this year, as it diversifies away from its core currency of US dollars.

It has pledged to return US$200 billion in cash to shareholders by the end of March 2017, and has increased the size of its share buyback programme to US$140 billion. It said in March that it would access the international and domestic debt markets to help fund the programme.

Apple rased 1.8 billion euros from its first euro-denominated issuance in November 2014, evenly split between 8-year and 12-year tranches

In February this year, Apple debuted in the Swiss franc market with a 1.25 billion franc (US$1.28 billion) trade, split between two tranches of 10 and 15 years.

In June it turned to the Japanese yen for the first time, issuing 250 trillion yen (US$2.1 billion) of 5-year global yen bonds, while late last month it made its debut in the sterling market with a 14-year and 27-year transaction that raised a combined 1.25 billion pounds.

Apple has hired Commonwealth Bank of Australia, Deutsche Bank and Goldman Sachs to arrange a series of debt investor calls starting today.

(Reporting by John Weavers; Editing by Daniel Stanton and Steve Garton)