Apple preparing $17B bond sale to help fund massive share buyback

Posted:
in AAPL Investors edited April 2014
A year after it turned to the bond markets to fund its capital repurchase program, Apple is planning to do the same yet again, with a sale price that would reportedly be the second highest in corporate history.

Bond


Apple has another massive $17 billion bond sale in the works that would target both the U.S. and foreign markets, according to the Financial Times. That cash will help the company increase its share buyback efforts, which were announced last week to be surging to $90 billion through the end of 2015.

Apple Corporate Comptroller Luca Maestri said last week that his company would likely raise "an amount of term debt financing similar to what we used in 2013." It was last April that Apple announced a six-part $17 billion bond offering that at the time was the largest in corporate history.

That bond sale has since been surpassed by Verizon's sale of $49 billion bonds in 2013. But if Apple were to exceed its sum from last year, it would rank as the second-highest bond sale in history.
Apple has taken on debt to help fund its share buyback program, allowing it to keep a strong domestic cash position without repatriating (and paying high taxes) on overseas money.
Though Apple has some $150 billion in cash, almost all of that -- $130 billion --?is held overseas. Executives from the company have signaled numerous times, including last week, that they have no plans to repatriate the overseas cash, citing high tax rates for bringing the money to the U.S.

Apple would not only need to buy back shares with domestic cash, but company executives also plainly stated that they would like to stay with a liquid cash position to allow flexibility for options like research and development investments, as well as acquisitions.

For its foreign debt sale, Apple is likely to target the eurozone for low interest rates, according to the Times. This would allow the company to diversify its base, and also help prevent saturation of the U.S. debt market with such a large sale.
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Comments

  • Reply 1 of 33
    So, if Apple sold it's debt in the "eurozone" could it bring those funds back to the US for share buybacks and dividends (since it isn't foreign profits) but then pay back the debts with funds already held in the "eurozone?" If that was legal it seems like a pretty easy way to get around repatriation tax requirements. I'm guessing that must not be kosher, but I don't understand why not.
  • Reply 2 of 33
    adrayvenadrayven Posts: 460member
    Simple fact is the 30 % repatriation rate is stupid.. other countries have it at under 10%.. even Canada is under 10% now.. We COMPETE against these countries for this cash flow.. Yet, our politicians are basically telling our American companies that they should do international business and to keep the cash made away from the US market.

    Stupid.. both sides of the isle need to be kicked to the curb..
  • Reply 3 of 33
    williamhwilliamh Posts: 632member

    Greg in Prague: I don't think that will work. I'm not an accountant, etc but the debt and the eurozone cash are held by different legal entities.

  • Reply 4 of 33
    echosonicechosonic Posts: 448member
    "Both sides?" Is that right? Be a pal and show me where i can research the GOPs efforts to levy massive corporate taxes. In fact, show me where i can learn about any GOP effort to levy massive taxes, and in return I'll show you the unicorn photos i took in malibu last week.

    "Both sides..." You'd be better off just blaming the "gubbermint" than trying to ascribe some blame for DNC policy on "both sides" like some partisan sycophant. One party is renowned for their willingness to tax the snot out of the working class to fund the purchase of the votes from the non working class, and it isnt "both sides".
  • Reply 5 of 33
    doggonedoggone Posts: 174member
    greginprague
    I was thinking the same thing nut willliamh may be right.
    I'm sure this will be discussed more in future articles.


    In answer to the other set of comments, it is quite clear that no politician in the US is willing to sacrifice their political career over tax reform. The special interests and lobby groups would ensure that the candidate would have no chance of getting re-elected since they would lose all their funding.
  • Reply 6 of 33
    beltsbearbeltsbear Posts: 314member
    Quote:

    Originally Posted by echosonic View Post



    "Both sides?" Is that right? Be a pal and show me where i can research the GOPs efforts to levy massive corporate taxes. In fact, show me where i can learn about any GOP effort to levy massive taxes, and in return I'll show you the unicorn photos i took in malibu last week.



    "Both sides..." You'd be better off just blaming the "gubbermint" than trying to ascribe some blame for DNC policy on "both sides" like some partisan sycophant. One party is renowned for their willingness to tax the snot out of the working class to fund the purchase of the votes from the non working class, and it isnt "both sides".



    I see you have mastered all of your 'talking points' this morning. 

  • Reply 7 of 33
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by echosonic View Post



    "Both sides?" Is that right? 

    Well both sides are equally opposed to a tax repatriation holiday. The last time they approved one, in 2004, it was supposed to create jobs, but it didn't. It only lined the pockets of corporate shareholders. A tax holiday also encourages corporations to continue to hold money offshore in expectation that there will be another tax holiday.

     

    But corporations don't really need a tax holiday to repatriate overseas money. There are perfectly legal ways of doing it tax free. Two well known schemes are called "Killer B" and "Deadly D" after their section namesakes in the federal tax code.

  • Reply 8 of 33
    rogifanrogifan Posts: 10,669member
    Apple up 3% today, Microsoft also. Google, Amazon, Netflix, Facebook are down. Seems tech money is flowing out of overvalued, momentum stocks back into Apple and Microsoft.
  • Reply 9 of 33
    solipsismxsolipsismx Posts: 19,566member
    It's a good time to be holding AAPL.
  • Reply 10 of 33
    knowitallknowitall Posts: 1,181member

    Lending money to gamble with shares?

    Sounds like a good idea.

     

    In the mean time, Apple could have had its own satellite communication network accessible for iPhones even on the North and South Pole.  

    That will burn money, but not even close to the amount they burn now, and will instead return real value to the customers.

     

    I think its official, Apple ran out of ideas.

  • Reply 11 of 33
    If I was Apple why would I bring back money here to the USA at 30% tax so they can just squander it and waste it. Apple can do more with the 30% to promote real world innovation then the government just throwing it to their buddies on a contract.
  • Reply 12 of 33
    Quote:

    Originally Posted by knowitall View Post

     

    Lending money to gamble with shares?

    Sounds like a good idea.

     

    In the mean time, Apple could have had its own satellite communication network accessible for iPhones even on the North and South Pole.  

    That will burn money, but not even close to the amount they burn now, and will instead return real value to the customers.

     

    I think its official, Apple ran out of ideas.




    Actually simple math shows Apple is taking a good approach.  The savings on the dividend will easily pay for the interest while pushing the EPS higher.  All remaining Apple shareholders own those earnings in effect. 

  • Reply 13 of 33
    Quote:

    Originally Posted by Rogifan View Post



    Apple up 3% today, Microsoft also. Google, Amazon, Netflix, Facebook are down. Seems tech money is flowing out of overvalued, momentum stocks back into Apple and Microsoft.

     

    Well if you are going to invest, I would say invest in tangible stuff when it comes to tech (that's my view).

     

    The thing that held Microsoft down was Ballmer. If MS gets back to being a software company and really basically rides with Apple, that's good news for both companies.

     

    Google is the most overvalued stock out there…and then Amazon.

  • Reply 14 of 33
    knowitallknowitall Posts: 1,181member
    Quote:

    Originally Posted by BeltsBear View Post

     



    Actually simple math shows Apple is taking a good approach.  The savings on the dividend will easily pay for the interest while pushing the EPS higher.  All remaining Apple shareholders own those earnings in effect. 


    Could be, and in 5 years time?

    I'll consider it when I need a financial institution. 

  • Reply 15 of 33
    thomprthompr Posts: 1,510member
    Quote:

    Originally Posted by knowitall View Post

     

    Lending money to gamble with shares?

    Sounds like a good idea.

     

    In the mean time, Apple could have had its own satellite communication network accessible for iPhones even on the North and South Pole.  

    That will burn money, but not even close to the amount they burn now, and will instead return real value to the customers.

     

    I think its official, Apple ran out of ideas.


    Apple has plenty of ideas.  They just don't need $150 B to implement them.

     

    Watch Apple do both.

     

    Thompson

  • Reply 16 of 33
    thomprthompr Posts: 1,510member
    Quote:
    Originally Posted by GregInPrague View Post



    So, if Apple sold it's debt in the "eurozone" could it bring those funds back to the US for share buybacks and dividends (since it isn't foreign profits) but then pay back the debts with funds already held in the "eurozone?" If that was legal it seems like a pretty easy way to get around repatriation tax requirements. I'm guessing that must not be kosher, but I don't understand why not.

    Debt is not earnings, so I don't see how anyone can tax it.  Would Apple get a deduction for each taxed dollar as they paid it back in Europe (and not just the interest)?  

     

    Thompson

  • Reply 17 of 33

    Perfectly wise strategy. Some amount of additional debt is an excellent thing, given the tax deductibility of interest payments (combined with the still historically low borrowing rates for highly-rated companies like Apple).

     

    Icahn's suggestion of $150B in additional debt was -- IMHO -- stupid, but a couple of tens of billions (on top of what will be $18B + $17B so far) won't hurt. This means that Apple has some more room to run with additional repurchases, if/as needed. The market clearly likes it!

     

    The huge deal will be in the Fall, with the expected new product and new product category intros. If that's seen as a home run -- as I totally expect it will be -- watch the stock take off..... 

  • Reply 18 of 33
    Quote:

    Originally Posted by knowitall View Post

     

    Could be, and in 5 years time?

    I'll consider it when I need a financial institution. 


    Then sell, and check back in 5 years.

     

    Stop whining.

  • Reply 19 of 33
    Quote:

    Originally Posted by echosonic View Post



    "Both sides?" Is that right? Be a pal and show me where i can research the GOPs efforts to levy massive corporate taxes. In fact, show me where i can learn about any GOP effort to levy massive taxes, and in return I'll show you the unicorn photos i took in malibu last week.



    "Both sides..." You'd be better off just blaming the "gubbermint" than trying to ascribe some blame for DNC policy on "both sides" like some partisan sycophant. One party is renowned for their willingness to tax the snot out of the working class to fund the purchase of the votes from the non working class, and it isnt "both sides".

     

     

    I agree 100%, however, the GOP continues to fail in convincing the people with solid policies to fix numerous problems. Unfortunately, when you have a nation of fools who elect fools, there is no real fix for stupid. 

  • Reply 20 of 33
    rogifanrogifan Posts: 10,669member
    spartan wrote: »
    Well if you are going to invest, I would say invest in tangible stuff when it comes to tech (that's my view).

    The thing that held Microsoft down was Ballmer. If MS gets back to being a software company and really basically rides with Apple, that's good news for both companies.

    Google is the most overvalued stock out there…and then Amazon.
    Amazing seeing all these tech stocks way down today and then Apple and Microsoft way up. Amazon is down another 4% today which means its close to being down 30% YTD. Netflix is down 5%, Facebook 3.5%. Perhaps we're finally starting to see the tech bubble pop and a flight to quality/value. Both Apple and Microsoft pay dividends and both are very good at printing money. :)
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