Apple saves $724 million in bond sale

Apple saves $724 million in bond sale

Summary: Apple's good timing has awarded the tech giant a windfall in savings over the company's recent bond sale.


Apple couldn't have picked a better time to borrow $17 billion.

As reported by Bloomberg, the iPad and iPhone maker's first bond sale since 1996, created to generate billions to launch a $100 billion capital return program for shareholders, has resulted in savings worth millions.

Data compiled by the publication shows that Apple has acquired an initial $40 million in annual interest savings compared with current yields on the six bonds sold. On April 30, the day of the offering, the yield on 10-year treasury bonds was pegged at 1.67 percent, whereas at the end of last week this rose to 2.13 percent.

With today's rates, Apple is set to save $724 million over the life of the bonds. Apple's notes are rated Aa1 — the second-highest grade — by a number of investor rating firms including Moody's.

David Brown, a manager of fixed-income assets at Neuberger Berman, commented:

"That's real money, even to Apple. I don't know if it was insight or luck, but they timed the market very well, so they were able to capture some very attractive yields to finance their capital plan. Kudos to them."

The bond sale is the largest currently on record and at the opening attracted over $50 billion in orders which left investing parties struggling to keep up with public interest. Apple issued the debt in order to fund a capital return program for shareholders after the company recorded the first quarterly drop in ten years, posting a net profit of $9.5 billion, down from $11.6 billion last year.

Apple plans to buy back $60 billion in shares, which will raise shareholder dividends over the next two years.

By offering bonds, the Cupertino-based firm will also save billions in taxes by avoiding the use of funds kept off U.S. soil. Apple CEO Tim Cook appeared in front of Congress on May 21 to defend the company's tax arrangements after public scrutiny, saying that Apple does not use "tax gimmicks" and pays every cent required by U.S. authorities. However, by keeping funds away from the U.S., the tech giant is able to save billions in tax and has joined the ranks of Google, Amazon and Starbucks — all of which have been accused of using tax loopholes to minimize taxation.

Topic: Apple

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  • Fuelling Contempt

    Any lucky gains made by APPL simple fuel my contempt for another greedy (American) corporation:
    - 30% cut of developers' wares
    - 30% margins
    - won't pay their own country's taxes, let alone mine
    - what a contrast between the beauty of their products and the hideousness of their corporate culture :-(
    • What a dumb rant

      #1- Try selling ANY software you develop using the process that was available before Apple created the App Store and see how far you get. Not only would you have a hard time finding a "distributor", your chances of making 20% out of the deal are very low.

      #2- I understand you that you don't like it, but what is wrong with 30% margins? When a product has demand and is selling very well without using sales gimmicks, there is no reason to drop prices. If you were selling a house in a great neighborhood (ie: high demand area), would you sell it at the maximum price the buyer is willing to pay or would you offer the house for significantly less just because you think your "equity" is to high?

      #3- Apple LEGALLY paid the taxes it was required to pay for. Just because they are LEGALLY using all the loopholes does not mean that they are not paying taxes in "their country". Don't blame Apple for playing by the rules of the game. Blame the people who write the rules to benefit themselves.

      On the tax issue, everybody is using whatever loopholes are available ... because nobody want's to pay more than they have to. Sadly, the government is failing to recognize that by increasing taxes, they are forcing corporations (and people) to move/keep money outside of the country. If the taxes were kept at a reasonable level, money made around the would flow in and in the end, provide more tax revenue than by overtaxing. A lower tax (without loopholes) can actually generate a hell of a lot more revenue.