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Topic: Apple

Report: Apple planning multi-billion dollar bond sale for shareholder program

Summary: Based on a new report, the iPhone maker is about to set a U.S. corporate financial record in the billions.

Rachel King

By for Between the Lines |

fd-appleearnings

Apple's capital return investment program continues to move front and center into the spotlight with a new financial deal that could land in the record books.

See also: Apple spends over $11.6m on R&D every day, but on what? | Apple Q2: Margins down; China growth, enterprise mojo up

The Cupertino, Calif.-based company is said to be planning to finance its $100 billion promised return to investors by selling $17 billion of bonds, according to Bloomberg.

If it goes through, it is expected to be the largest U.S. corporate offering in history.

Here is how it would work out, according to Tuesday's report:

Apple is issuing $3 billion of floating-rate notes and $14 billion of fixed-rate securities in six parts with maturities from three to 30 years, according to a person familiar with the offering. Proceeds may help the company avoid repatriation taxes on its $102.3 billion of funds held overseas as Chief Executive Officer Tim Cook returns an additional $55 billion to shareholders through 2015 to compensate for a stock that’s been hammered by signs of slowing growth.

To recall, in conjunction with the second quarter earnings statement last week, Apple announced it would be doubling its stock buyback program for investors.

That equates to a $55 billion increase from was previously announced, translating to an average rate of $30 billion per year between August 2012 through December 2015.

Cook had added in prepared remarks that Apple is "very fortunate to be in a position to more than double the size of the capital return program we announced last year."

Apple reportedly started taking steps on that path to its now $100 billion capital return program, including filing paperwork with the U.S. Securities and Exchange Commission as well as initiating talks led by Deutsche Bank and Goldman Sachs.

Topics: Apple, iOS, iPhone, iPad, Tech Industry

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11 comments
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  • Does this strike anyone else as ridiculous?

    Apple has $145 billion in cash or equivalents, and so doesn't have to borrow a penny. But to make good on Tim Cook's promise to buy back shares and pay a higher dividend, Apple has chosen to sell bonds because the company, which does MAJOR business in the United States, has decided that it will not subject its earnings to US corporate taxes by stashing their cash in foreign banks. What a GREAT corporate model to follow! Make heaps of money from US citizens, but avoid paying taxes to support the Federal government those same citizens need to maintain the stable markets, infrastructure and economic system that Apple needs to survive.

    To be fair, Apple is not the only corporation to take this path. Even Microsoft had to borrow money in the past to pay dividends even though they had enough corporate cash to pay them. But to be on the verge of making corporate history with the size of this bond sale, and at the same time to be sitting on an unimaginable amount of cash that Apple feels no need to share with the government of their biggest market for Apple's products, is surely stooping even lower than before.
    DrTechnical@...
    Reply 2 Votes

    • Nah, just another case of "holding it wrong",

      only this time investors were holding the stocks wrong, in that they were expecting to hold them for a short while, maybe a year, then sell at a profit. This way, Apple gets investors to hold bonds for 3 to 30 years!
      wizard57m-cnet
      Reply 2 Votes

      • Anyone who thinks in terms of a year...

        shouldn't invest in the stock market. They're not investing; they're gambling, and the house always wins.

        I've been holding Apple stock for 8 years, and IBM and J and J for nearly 20. I have no plans to sell any of them yet.
        msalzberg
        Reply 1 Vote

        • Should have sold them at $700

          and bought them back now at less then $400, would have made a killing! ;-)
          martin_js
          Reply Vote

          • I would have made...

            more of a killing. But I'm a buy and hold kind of guy.
            msalzberg
            Reply 1 Vote

        • Re: and the house always wins.

          There is no "house" in the stock market, and unlike gambling, things you do to improve your odds are not automatically classed as "cheating".
          ldo17
          Reply Vote

          • There is a house...

            Capital gains taxes, commissions, fees...all of these things have to be accounted for.

            If you really think you can time the stock market so precisely, why are you here, and not at your villa on Aruba?
            msalzberg
            Reply 1 Vote

    • If the loopholes exist, then you take advantage of them

      You and I do this all the time in refernce to our taxes, I'm guessing.
      William Farrel
      Reply 1 Vote

    • Apple is betting on a tax holiday or decrease in the corporate tax rates.

      With more than a few politicians seriously talking about a big re-work of US tax code, it makes a lot of sense to finance the bonds at the currently minuscule rates, especially when you have a huge revenue stream and tons of cash just waiting to be repatriated.
      matthew_maurice
      Reply 1 Vote

      • The question is: What would Apple do with the cash if they DID repatriate?

        It doesn't seem as though Apple has been in any hurry historically to return cash to shareholders, and they haven't been able to find ways to re-invest earnings into Apple's operations or research. The motivation at this point seems to be to placate shareholders and Wall Street after some lackluster financial performance.

        So they get $100 billion additional from bond sales, only to turn that back over to shareholders...But that doesn't touch the sure-to-grow-larger $145 billion Apple has already. The point???
        DrTechnical@...
        Reply Vote

  • It's all about perception...

    Give the money back to shareholders, and get a lot of good press, and a lot of goodwill from those shareholders.

    Then, get the money back through bond sales, and your bank account will still look very good.
    adornoe
    Reply Vote
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