Apple paves way for first debt sale to finance $100B capital return

Apple paves way for first debt sale to finance $100B capital return

Summary: The maker of shiny rectangles reportedly is seeking assistance from two major banks in a bid to fund a $100 billion shareholder return program, which it currently can't finance unless it sells debt.

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TOPICS: Apple
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Apple has taken the first steps to find funds for its $100 billion capital return program to shareholders, as it promised during its second quarter earnings on April 23.

The iPhone and iPad maker filed paperwork with the U.S. Securities and Exchange Commission on Monday, and will begin talks led by Deutsche Bank and Goldman Sachs, the Reuters news agency reported.

Apple has more than $144.7 billion in cash and doesn't have a penny of debt to its name, making it the wealthiest technology companies currently in existence.

However, the company only has an estimated $45 billion on hand in the U.S., with the rest of that cash offshore. It won't repatriate those funds as it needs to invest in its local subsidiaries, but it would also face a massive tax bill should it return that cash back on U.S. soil.

As a result of this, Apple comes up short and doesn't have the available funds to accomplish this massive capital return program.

The plan is for Apple to sell debt for the first time in its history in order to fund a massive $100 billion capital return program, which would put cash back into the hands of the company's investors. Apple is also planning to increase dividend payments by 15 percent over the next two years.

To do this, Apple needs to take on debt to fund the investor cash payouts. In getting in touch with the two banks, the company is laying the foundation groundwork in getting this process started.

It's not clear if the two banks will lead the bond offering. By issuing bonds, Apple will be able to raise capital and pay back the money in future.

It comes only a week after Apple reported its first quarterly profit dip in a decade.

Topic: Apple

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3 comments
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  • it has the money ...

    As you mentioned it has over $144 billion in the bank and it doesn't need to go into debt. However this is a way for Apple to avoid taxes and to try to get more money from judgments in terms of interest. Since it did not borrow any money Judge Koh ruled that Samsung is correct in that only the " savings" bank interest rate would apply to the interest on the judgement amount as Apple doesn't borrow money (or needs to) rather than Apples argument that the interest rate should be more in terms of the interest rate that it would pay if it had borrowed that money. I guess we'll find out later of courts take into account tax avoidance schemes for the judgement interest rate.
    BorgX
    • Another Reason…

      There is another reason. The interest rate Apple will pay will be no worse than paying a 3% dividend. With each share Apple retires no dividend on that share. With each share retired the closer Apple gets to going private.
      Yacko
    • "Scheme"???

      You insinuate that Apple is perpetrating "tax avoidance schemes"? What scheme? Where is the "scheme" to avoid paying taxes? So all the other companies who keep their cash overseas are comitting fraud also? Routing monies through low and no tax countries is illegal? And what does issuing bonds have to do with a Samsung judgement?

      Welcome to the real world of business in a GLOBAL economy.
      LaddsRV