Apple bond sale secures $17 billion

Apple bond sale secures $17 billion

Summary: Tech giant Apple has managed to secure $17 billion via a bond sale to finance a plan to return extra cash to shareholders.

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TOPICS: Apple
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Apple launched into the debt markets Tuesday and was able to secure $17 billion through the non-bank bond as part of plans to placate company shareholders.

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During second quarter earnings on April 23, Apple said it would launch a $100 billion capital return program for shareholders as it recorded the first quarterly drop in ten years, making a net profit of $9.5 billion -- down from $11.6bn last year.

Last week, the tech giant said it would buy back $60 billion in shares, which would raise shareholder dividends by 15 percent over the next two years.

The bond sale, Apple's first, took place even though the iPad and iPhone maker has cash reserves of $144.7 billion and not a penny of debt to its name. Economically, to stick to plans which would placate Apple's shareholders, it is cheaper for Apple to raise funds through a bond sale, rather than touch the $100bn cash reserve in accounts outside of the United States -- which would then be liable for heavy U.S. taxes if repatriated.

The Cupertino., Calif-based firm will need to raise roughly $60 billion over the next three years to put money back in the hands of its investors, which include T.Rowe, Vanguard Group and State Street Corporation.

According to the Reuters news agency, investors had a tough time submitting orders quickly enough to jump on the bond deal, attracting over $50 billion in orders by midday in New York. 

Apple's jump into the debt market was led by Deutsche Bank and Goldman Sachs. It is hoped that the capital return program will placate shareholders who have been frustrated by recent share dips in the past few months, triggered by concerns over Apple's future growth.

As noted by the news agency, Apple sold bonds in the increments below:

$1 billion of three-year floating-rate notes, $1.5 billion of three-year fixed-rate notes, $2 billion of five-year floating-rate notes, $4 billion of five-year fixed-rate notes, $5.5 billion of 10-year fixed-rate notes and $3 billion of 30-year fixed-rate notes.

Rajeev Sharma, portfolio manager at First Investors Management commented:

"Apple made its intentions clear that this deal is for shareholder-friendly activity, but they have tremendous metrics and brand recognition. Apple is something everyone wants in their portfolio."

Apple announced the move to double its stock buyback program for investors during the Q2 earnings conference call. This translates in to a $55 billion increase at an average rate of $30 billion per year between August 2012 through December 2015. Apple CEO Tim Cook commented that the tech giant is "very fortunate to be in a position to more than double the size of the capital return program we announced last year."

Topic: Apple

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7 comments
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  • Some nice racket.

    Don't use YOUR money...use somone elses money to buy back your stock.

    And yes...I know...this is not exclusive to Apple...and I am not bashing Apple...this time.
    IT_Fella
  • Right, IT_Fella

    They have a net profit of close to $10 Billion, cash reserves of almost $145 Billion, and then they go and borrow $10 Billion to increase dividends.

    Other people's money...
    bb_apptix
  • Beyond Just Smoke & Mirrors Ridiculous!

    Apple loves to mislead the whole world at large, that they actually have anything greater in value than SOFT ASSETS. Sure they owe no money now, but this is effectively going to put them in debt. They don't have debt now, because they Lease almost everything and own no factories to maintain or invest in expanding production. Their hard assets basically consist of some real estate and minor buildings for office space. But most store space, etc is all leased.

    Only about $30 Billion of their cash is readily available to spend. The rest is already in short term and long term Securities. Some of the long term securities won't mature for between 10 and 30yrs. Like us ordinary people, that take $50 of our Real Spendable Cash to invest/buy $100 Bonds, that $100 Face Value is not going to be available for years! ......so in reality, since they've been literally pouring every penny of their so called CASH accumulation into nothing but Long Term Securities the last 5yrs, these Bond buyers are betting that Apple will still be around to collect that $100 Billion in Long Term Securities when it all matures in 10 to 30yrs!

    All you delirious Apple fans so caught up in the iMagical Reality Distortion Field aren't going to know what to do when Steve Jobs's Second Coming doesn't happen and none of you get caught up in the iRapture, that you all seem to think will happen!

    #1 - Apple's soft assets all set on inflated numbers to begin with. Their Market Cap calculated properly instead their way, isn't near as great either. When you are a totally outsourced manufacturer, you depend on the CAPeX spending of others for most of your innovations. Companies like SAMSUNG. Who just doubled up on Apple's March 2013 Quarter Smartphone Sales (w/ near 70 Million), in a quarter that should have been down prior to Galaxy S4 launch!

    #2 - If anything, Apple's about to become the Second Coming of Microsoft's Bubble Burst and all the rest of the Totally Out Sourced companies falling to the back of the bus in market share. Including Dell, Gateway, HP, Cisco, etc, who all now invest their profits in foreign economies and companies to do all their thinking and making for them!

    #3 - Companies like Apple are the primary reason we've become a debtor nation and countries like Germany and China have the Greatest Trade Surplus in the World. Something America hasn't had for years and will most likely never have again! .....since we as a nation have been busier investing and securing freedom for foreign nations than our own right here at home!!!

    Mark my words...... Samsung didn't become the #1 Electronics Corporation and Smartphone Seller in the World, because they depend on others to R&D new technologies, make their parts or put them all together for them. They certainly don't just spend all their money outside South Korea either. Samsung is one of the main reasons S. Korea has climbed to #15 in World Economies and as high as #11 or #12 Standard of Living. That compares to the far larger US being #6 in Standard of Living and S. Korea is another of the few countries (like Germany) that not only has a Trade Surplus, but has one with China. Now with leading technologies in Memory, Screens (Flexible OLED), Smartphones, Global Construction, Ship Building, Banking and Insurance, Home Appliances, Processor and Chip Foundries (set to challenge TSMC in 3yrs) Apple doesn't have a prayer or chance in hell to compete against them!!! ....especially when Samsung outspends Apple in their own backyard for another Top CiCi (corporate investor) Awards here!!!
    KronJohn
  • The funniest development

    would be if the same Apple shareholders who get back shares now buy in this bond.
    danbi
  • And the coupon rates?

    No mention of the coupons in the article?
    Beast Of Bodmin
  • Tom Peters Tweet today on Apple

    "So Apple's apparently determined to become just-another-producer-turned-financial-holding-company."
    Lord Minty
  • un-American

    So Apple pokes the US in the eye by not re-patriating any of the artificial profits that it assigned to overseas divisions through various bookkeeping machinations. All Americans should understand that. When your company has the biggest cash reserve in the world and you go and borrow more money to avoid paying taxes to the country that helped you to become the richest company in the world, capitalism is failing the world and you are leading the charge.
    mswift@...