This week saw two of the USA’s most recognisable companies launch bond issues in the Australian market; Apple Corporation and the Coca Cola Company. While both were greeted with strong demand – the Australian market is in need of more quality non-financial corporate bonds – it was of interest to note that the CCC bonds were issued below the rate of the Apple bonds.
Apple has a credit rating from Standard & Poor’s of AA+ while CCC is rated an AA- credit risk. Under normal circumstances a company with a higher credit rating should be able to issue bonds at a lower yield, reflecting its higher creditworthiness. As can be seen from the table below this was not the case this week:
| Apple Corporation | Coca Cola Company | |
| 4 year | Swap + 82bps | Swap + 67bps |
| 7 year | Swap + 125bps | Swap +105bps |
The pricing issue perplexed a number of market watchers with the consensus suggesting that there was no single reason for the discrepancy. Reasons flagged were the fact that CCC has been issuing bonds a lot longer, the market for CCC is globally more liquid, the company is more diversified and a consumer staple company rather than one in the more volatile IT sector. Ratings are not the be all and end all when it comes to pricing and the market itself appears to give Apple a lower rating than the main rating agencies.