Apple bond sale secures $17 billion

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

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.


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."