Apple to hold investor call for first-time bond offering in euros - report

Posted:
in AAPL Investors edited November 2014
Deutsche Bank, Goldman Sachs and Apple are expected to host a call with investors today, arranging for a new blockbuster bond deal that will come at least partly in euros, according to a new report.

Bond


Citing a person familiar with the plans, The Wall Street Journal revealed the anticipated call on Monday, revealing that the bond issuing could come as soon as this week. If the rumor proves true, it would be the first time that Apple has issued debt in a currency other than the U.S. dollar.

Now would be an opportune time for Apple to issue a bond deal in euros, given record-low levels of borrowing costs in Europe. The money earned will allow Apple to finance its share buybacks and dividends.

Most of Apple's huge sum of cash is held overseas, and repatriating it to buy back shares or issue dividends would cost the company a considerable sum in U.S. taxes. As a result, Apple has opted instead to borrow, in addition to using its domestic cash, to fund its capital return program.

As of last quarter, Apple had $155.2 billion in cash and marketable securities. Apple has said multiple times that it has no plans to bring its cash back to the U.S. because of high tax rates.

Apple issued a $17 billion six-part bond offering in 2013, which at the time was the largest ever for a U.S. corporate offering. The company offered another $12 billion bond sale earlier this year.
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Comments

  • Reply 1 of 116
    Makes sense, then they can pay it off with their international cash hoard.
  • Reply 2 of 116

    When is the conference call?

  • Reply 3 of 116
    macxpressmacxpress Posts: 4,964member
    Quote:


     Deutsche Bank, Goldman Sachs and Apple are expected to host a call with investors today, arranging for a new blockbuster bond deal that will come at least party in euros, according to a new report.


     

    I assume they meant partly? Do they even read what they write, or just write and post?

  • Reply 4 of 116
    Makes sense, then they can pay it off with their international cash hoard.

    Then why not just use the cash instead? Unless there is some potential regulatory arbitrage here to pursue: i.e., use the euro-denominated bond funds to finance activities in the US, and use the non-US funds to pay the coupon and principal.

    I am not sure whether that would fly with the IRS, however.

    I am very curious to see what Apple has to say about this.
  • Reply 5 of 116
    MacProMacPro Posts: 18,367member
    If the $ continues to strengthen against European currencies I'd suggest Apple buying England and making it the 51st State. Wales, Scotland and N. Ireland could become Celtica or some new a catchy name. I admit I am unsure of the tax ramifications though.
  • Reply 6 of 116
    MacProMacPro Posts: 18,367member
    macxpress wrote: »
    I assume they meant partly? Do they even read what they write, or just write and post?

    'Party' was probably nearer the truth than you'd think! :D
  • Reply 7 of 116
    blastdoorblastdoor Posts: 1,950member

    Interesting... I wonder if this is driven by economic considerations or tax avoidance considerations (or both). 

     

    Yes, interest rates in the Euro area are very low. But the Euro area is also teetering on the brink of deflation, which means that *real* rates might not be quite so low. Of course, if real rates turn out to be higher than anticipated (due to deflation), Apple can always just pay off the debt. And it's generally good to diversify, so having some debt denominated in dollars and some in other currencies might be a good hedge. 

     

    I wonder what the tax implications are. If Apple issues debt in Euros, can they bring that money back to the US to pay dividends and buy back shares without paying taxes? That is, are they able to argue that the money being brought back to the US isn't profit, but rather borrowed money, and the profit part is still overseas? If that's allowed then this seems to be a pretty good tax avoidance scheme (not that I think tax avoidance schemes are "good").

  • Reply 8 of 116
    If the $ continues to strengthen against European currencies I'd suggest Apple buying England and making it the 51st State. Wales, Scotland and N. Ireland could become Celtica or some new a catchy name. I admit I am unsure of the tax ramifications though.

    Hmm.. Not a bad idea! A beachhead close to the Continent.

    I have to admit I like their accent too.
  • Reply 9 of 116
    blastdoor wrote: »

    I wonder what the tax implications are. If Apple issues debt in Euros, can they bring that money back to the US to pay dividends and buy back shares without paying taxes? That is, are they able to argue that the money being brought back to the US isn't profit, but rather borrowed money, and the profit part is still overseas? If that's allowed then this seems to be a pretty good tax avoidance scheme (not that I think tax avoidance schemes are "good").

    I think that's iff-y, and may not fly. (But I am not sure about that.)
  • Reply 10 of 116
    MacProMacPro Posts: 18,367member
    Hmm.. Not a bad idea! A beachhead close to the Continent.

    I have to admit I like their accent too.

    cheaper tourist trips to London and far lower costs on Stilton cheese ... win win .... Oh and Cheddar Cheese too, which goes great with Apples! :D
  • Reply 11 of 116
    Quote:

    Originally Posted by anantksundaram View Post





    Then why not just use the cash instead? Unless there is some potential regulatory arbitrage here to pursue: i.e., use the euro-denominated bond funds to finance activities in the US, and use the non-US funds to pay the coupon and principal.



    I am not sure whether that would fly with the IRS, however.



    I am very curious to see what Apple has to say about this.



    I believe the answer to 'why not use cash' is - if you can borrow at (for example) 2% and make (for example) 10% with the cash you have than you still make 8% total where as if you just use cash you lose that ability to make anything. 

     

    Someone who understands this better can correct me if that's not right. This being the internet, I'm sure he/she will.

  • Reply 12 of 116

    I believe the answer to 'why not use cash' is - if you can borrow at (for example) 2% and make (for example) 10% with the cash you have than you still make 8% total where as if you just use cash you lose that ability to make anything. 

    Someone who understands this better can correct me if that's not right. This being the internet, I'm sure he/she will.

    It appears none of us understands this yet due to incomplete information. It's clear the author of the story has no clue either.
  • Reply 13 of 116
    Quote:

    Originally Posted by digitalclips View Post



    If the $ continues to strengthen against European currencies I'd suggest Apple buying England and making it the 51st State. Wales, Scotland and N. Ireland could become Celtica or some new a catchy name. I admit I am unsure of the tax ramifications though.



    Anything that would make the NFL London franchise more likely has got be a good thing..

  • Reply 14 of 116
    Quote:
    Originally Posted by digitalclips View Post

    If the $ continues to strengthen against European currencies I'd suggest Apple buying England and making it the 51st State. Wales, Scotland and N. Ireland could become Celtica or some new a catchy name. I admit I am unsure of the tax ramifications though.

     

    Some of us Limeys would actually like that :)
  • Reply 15 of 116

    I believe the answer to 'why not use cash' is - if you can borrow at (for example) 2% and make (for example) 10% with the cash you have than you still make 8% total where as if you just use cash you lose that ability to make anything. 

    Someone who understands this better can correct me if that's not right. This being the internet, I'm sure he/she will.

    Apple's cash earns nowhere close to 2%. I am too lazy to give you a cite, but you can easily look it up in their financials.

    That argument made sense for repurchases with dollar debt since it obviated the need for repatriating cash from abroad and paying a 35% tax. It does not (yet) make sense with the foreign cash. I can only think of two arguments: (1) Apple is looking for a natural hedge for its non-us cash flows. (2) Perhaps there's something in the works vis-a-vis taxes on repatriating the cash back home.
  • Reply 16 of 116
    fracfrac Posts: 480member
    If the $ continues to strengthen against European currencies I'd suggest Apple buying England and making it the 51st State. Wales, Scotland and N. Ireland could become Celtica or some new a catchy name. I admit I am unsure of the tax ramifications though.

    That made me smile and...hey...anything's better than a Conservative UKIP anti-Euro alliance though Yorkshire would probably secede :\
  • Reply 17 of 116
    gfdsagfdsa Posts: 22member
    jsmythe00 wrote: »
    Me? I'm tired of these companies skirting around not paying tax
    I'm sure every Apple employee pays as much tax as you do, how can you compare yourself to a corporation?
  • Reply 18 of 116
    Then why not just use the cash instead?

    I think that they can use domestic cash only, and domestica cash is at historical lows.

    See: http://www.zerohedge.com/news/2014-11-03/why-apple-preparing-issue-even-more-bonds
  • Reply 19 of 116
    melgrossmelgross Posts: 31,876member
    Then why not just use the cash instead? Unless there is some potential regulatory arbitrage here to pursue: i.e., use the euro-denominated bond funds to finance activities in the US, and use the non-US funds to pay the coupon and principal.

    I am not sure whether that would fly with the IRS, however.

    I am very curious to see what Apple has to say about this.

    They would need to bring the money back here in order to do that. This way, the bonds are backed by the cash and investments, but won't be directly paid back by them.

    And I'm also trying to find out when the call is being done. If it's being done in the EU, then with the time difference, it could be held while we're writing.
  • Reply 20 of 116
    melgrossmelgross Posts: 31,876member
    blastdoor wrote: »
    Interesting... I wonder if this is driven by economic considerations or tax avoidance considerations (or both). 

    Yes, interest rates in the Euro area are very low. But the Euro area is also teetering on the brink of deflation, which means that *real* rates might not be quite so low. Of course, if real rates turn out to be higher than anticipated (due to deflation), Apple can always just pay off the debt. And it's generally good to diversify, so having some debt denominated in dollars and some in other currencies might be a good hedge. 

    I wonder what the tax implications are. If Apple issues debt in Euros, can they bring that money back to the US to pay dividends and buy back shares without paying taxes? That is, are they able to argue that the money being brought back to the US isn't profit, but rather borrowed money, and the profit part is still overseas? If that's allowed then this seems to be a pretty good tax avoidance scheme (not that I think tax avoidance schemes are "good").

    Apple is taking advantage of the fact that the Euro has been dropping relative to the dollar. That would be in addition to interest rates offered there. But they aren't just buying bonds in Euros.
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