Apple's first-ever Japanese yen bond raises $2 billion US

Posted:
in AAPL Investors edited June 2015
In a filing with the U.S. Securities and Exchange Commission on Thursday, Apple revealed that it has raised 250 billion yen through its first-ever Japanese bond offering, which is the equivalent of $2 billion U.S.




The bonds mature on June 10, 2020, and are managed by Goldman Sachs International and Mitsubishi UFJ Securities International. Apple's bonds are rated AA1 by Moody's Investors Service and AA+ by Standard & Poor's Ratings Services.

Bond offerings from Apple are always a hot item for investors, as the company is the most valuable in the world, and as of the end of last quarter it had a massive $194 billion in cash.

Apple's first yen-denominated bond will take advantage of Japan's extremely low interest rates. The company borrows to fund its capital return program for investors, which includes share buybacks and a quarterly dividend.

Apple's current plan calls for it to return $200 billion to shareholders by the end of March 2017.

The $2 billion Japanese bond is one of the largest in the nation's history, but Apple's offering fell short of the $2.2 billion U.S. bond issued by Citigroup in 2007.

Last November, Apple also offered its first-ever euro-denominated bond, also taking advantage of extremely low interest rates. The iPhone maker raised $3.5 billion from that bond offering.
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Comments

  • Reply 1 of 23
    jerry602jerry602 Posts: 36member
    Is anyone more familiar with these than I am, and know about what the final return could be on something like this?
  • Reply 2 of 23
    jerry602jerry602 Posts: 36member
    Is it on par or dramatically more conservative than stock?
  • Reply 3 of 23
    anantksundaramanantksundaram Posts: 19,387member
    jerry602 wrote: »
    Is anyone more familiar with these than I am, and know about what the final return could be on something like this?

    jerry602 wrote: »
    Is it on par or dramatically more conservative than stock?

    While the interest rate on these bonds will be very low, the TOTAL return could be higher -- or lower -- depending on what happens in the broader bond market. If market interest rates fall, then the bond prices will be higher, the opposite if market interest rates rise. Then, there is the currency factor: has the yen bottomed out against the dollar or not. If the yen appreciates relative to where it is now, a dollar investor in those bonds will be better off.

    Hate to sound like an economist, but bottom line, it's impossible to predict.

    Speaking for myself, I'd stay with the stock. The combination of dividends and likely capital gains (although likely to be lower than in the past few years) is probably a better, and oddly enough, a more conservative bet.
  • Reply 4 of 23
    rob bonnerrob bonner Posts: 235member
    Why did Apple issue these bonds? Not thinking they need the money.
  • Reply 5 of 23
    2old4fun2old4fun Posts: 226member
    Quote:

    Originally Posted by Rob Bonner View Post



    Why did Apple issue these bonds? Not thinking they need the money.



    Apple makes money by using the bonds to fund the operation.  And you know that they need every revenue stream that they can find as the company is too heavily dependent on the iPhone. /s

  • Reply 6 of 23
    thewhitefalconthewhitefalcon Posts: 4,453member
    Quote:

    Originally Posted by Rob Bonner View Post



    Why did Apple issue these bonds? Not thinking they need the money.



    They're using the bonds to buy back the stock, because they don't want to repatriate the massive foreign cash holdings and lose a huge chunk to the IRS.

  • Reply 7 of 23
    asciiascii Posts: 5,941member

    Does that say 0.35% on there? That's less than inflation. So it's a 5 year investment where you get less back in real terms than you started with?

  • Reply 8 of 23
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by ascii View Post

     

    Does that say 0.35% on there? That's less than inflation. So it's a 5 year investment where you get less back in real terms than you started with?




    The bonds are intended for Japanese market. Japan has been in a deflation trend for a year or so, although they did see a tiny up tick in inflation last month. Their currency has also seen devaluation lately compared to other currencies but may be bottoming out about now.

  • Reply 9 of 23
    SpamSandwichSpamSandwich Posts: 31,412member
    ascii wrote: »
    Does that say 0.35% on there? That's less than inflation. So it's a 5 year investment where you get less back in real terms than you started with?

    It's no risk, which is better than the stock market if you have to invest millions or billions.

    Compare to this story from Feb. of this year: http://www.wsj.com/articles/germany-sells-five-year-debt-at-negative-yield-for-first-time-on-record-1424871074
  • Reply 10 of 23
    asciiascii Posts: 5,941member
    Quote:

    Originally Posted by mstone View Post

     



    The bonds are intended for Japanese market. Japan has been in a deflation trend for a year or so, although they did see a tiny up tick in inflation last month. Their currency has also seen devaluation lately compared to other currencies but may be bottoming out about now.




    Where are you getting those numbers from? According to tradingeconomics.com Japan has positive inflation, and they get their figures from the Japanese Ministry of Internal Affairs.

    http://www.tradingeconomics.com/japan/inflation-cpi

  • Reply 11 of 23
    asciiascii Posts: 5,941member
    Quote:

    Originally Posted by SpamSandwich View Post





    It's no risk, which is better than the stock market if you have to invest millions or billions.



    Compare to this story from Feb. of this year: http://www.wsj.com/articles/germany-sells-five-year-debt-at-negative-yield-for-first-time-on-record-1424871074



    Pretty amazing that they would offer something with negative yield and people would buy it. Wouldn't you be better off just turning your money in to physical cash Euros? Provided you could keep it physically safe, there would be no negative yield and it would be equally as safe financially.

  • Reply 12 of 23
    anantksundaramanantksundaram Posts: 19,387member
    Quote:

    Originally Posted by TheWhiteFalcon View Post

     
    Quote:
    Originally Posted by Rob Bonner View Post



    Why did Apple issue these bonds? Not thinking they need the money.



    They're using the bonds to buy back the stock, because they don't want to repatriate the massive foreign cash holdings and lose a huge chunk to the IRS.


    They can't do that. They'll be violating US tax laws if they did that.

  • Reply 13 of 23
    anantksundaramanantksundaram Posts: 19,387member
    Quote:

    Originally Posted by Rob Bonner View Post



    Why did Apple issue these bonds? Not thinking they need the money.

    I think it's just to provide a balance-sheet hedge. I.e., do a 'natural' currency hedge of their yen cash inflows by matching it with a yen liability (just as they did with SFRs a couple of months ago).

     

    They certainly don't need the cash.

  • Reply 14 of 23
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by ascii View Post

     



    Where are you getting those numbers from? According to tradingeconomics.com Japan has positive inflation, and they get their figures from the Japanese Ministry of Internal Affairs.

    http://www.tradingeconomics.com/japan/inflation-cpi




    As I mentioned they did finally see an uptick in inflation. I posted that based on an article I read in the WSJ last month.

     

    http://www.wsj.com/articles/japan-inflation-rises-for-first-time-in-nearly-a-year-1430442185

  • Reply 15 of 23
    chadbagchadbag Posts: 1,100member
    Quote:

    Originally Posted by anantksundaram View Post

     

    They can't do that. They'll be violating US tax laws if they did that.




    Do what, leave  their subsidiary money with the subsidiary?  How is that against US Tax laws?

  • Reply 16 of 23
    anantksundaramanantksundaram Posts: 19,387member
    Quote:
    Originally Posted by chadbag View Post



    Do what, leave  their subsidiary money with the subsidiary?  How is that against US Tax laws?


    Maybe you should try and understand the thread before you post?

     

    I was responding to TheWhiteFalcon's post where he said that "they're using the bond proceeds to buy back stock." If it's Apple -- and not the subsidiary -- issuing the bonds (as it is, in this case), the proceeds of a foreign issue cannot be used to repurchase shares in the US. Period. That would violate US tax laws on repatriation of foreign funds.

     

    (Add: And if it were the subsidiary issuing the bonds -- which it is not -- the subsidiary could not buy back the parent's stock anyway, so that would be moot).

  • Reply 17 of 23
    chadbagchadbag Posts: 1,100member
    Quote:

    Originally Posted by anantksundaram View Post

     

    Maybe you should try and understand the thread before you post?

     

    I was responding to TheWhiteFalcon's post where he said that "they're using the bond proceeds to buy back stock." If it's Apple -- and not the subsidiary -- issuing the bonds (as it is, in this case), the proceeds of a foreign issue cannot be used to repurchase shares in the US. Period. That would violate US tax laws on repatriation of foreign funds.

     

    (Add: And if it were the subsidiary issuing the bonds -- which it is not -- the subsidiary could not buy back the parent's stock anyway, so that would be moot).




    And what if the foreign subsidiary is purchasing those shares in Japan?  Or paying dividends to Japanese stock holders?  (honest question)

  • Reply 18 of 23
    anantksundaramanantksundaram Posts: 19,387member
    chadbag wrote: »
     
    Maybe you should try and understand the thread before you post?

    I was responding to TheWhiteFalcon's post where he said that "they're using the bond proceeds to buy back stock." If it's Apple -- and not the subsidiary -- issuing the bonds (as it is, in this case), the proceeds of a foreign issue cannot be used to repurchase shares in the US. Period. That would violate US tax laws on repatriation of foreign funds.

    (Add: And if it were the subsidiary issuing the bonds -- which it is not -- the subsidiary could not buy back the parent's stock anyway, so that would be moot).


    And what if the foreign subsidiary is purchasing those shares in Japan?  Or paying dividends to Japanese stock holders?  (honest question)

    AAPL is listed only in the U.S. Even if there were Japanese shareholders (as I am sure there are), they would have to buy their shares in the U.S. in dollars and get all their dividends and repurchases in dollars as well. In other words, it's not something the subsidiary could do. Apart from that, something like that -- even if it could be done -- would considered as working around US tax laws, is hence not legal.

    (Sorry if I sounded curt, I thought you were being snarky in your original post. My bad.)
  • Reply 19 of 23
    chadbagchadbag Posts: 1,100member
    Quote:

    Originally Posted by anantksundaram View Post





    AAPL is listed only in the U.S. Even if there were Japanese shareholders (as I am sure there are), they would have to buy their shares in the U.S. in dollars and get all their dividends and repurchases in dollars as well. In other words, it's not something the subsidiary could do. Apart from that, something like that -- even if it could be done -- would considered as working around US tax laws, is hence not legal.



    (Sorry if I sounded curt, I thought you were being snarky in your original post. My bad.)



    ok, thanks.   Makes sense

  • Reply 20 of 23
    bradipaobradipao Posts: 145member
    They can't do that. They'll be violating US tax laws if they did that.

    As far as I know it is legal, if it is Apple Inc (not subsidiary) to borrow money in a foreign country. Apple already did it in Europe.

    It means also that Apple has to re-pay borrowed money with Apple Inc cash, not cash held in foreign country (for this reason it is legal). Probably they are still waiting for a tax holiday in next years.
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