Apple to borrow again with company's first-ever Canadian dollar bond

Posted:
in AAPL Investors
Apple's international borrowing continues to expand to new countries, with the company revealing in a U.S. Securities and Exchange Commission filing on Tuesday that it will offer its first debt offering in Canadian dollars.




The amount Apple is looking to raise has not yet been revealed, but the Canadian debt will be the first time Apple has borrowed specifically in the Great White North.

Apple plans to pay interest on the notes it issues semi-annually and in February and August of each year, beginning in February of 2018. The filing indicates that the notes will mature in August of 2024.

With a growing cash hoard and the vast majority of that money kept outside of the U.S., Apple has turned to international debt markets to generate funds. Apple's bonds are popular with investors given the company's continued success and $261.5 billion in cash.

In recent years, Apple has issued bonds around the world, including the U.K., Switzerland, Australia, Taiwan, and Japan.

Apple uses the money it raises from the sale of bonds to help finance share buybacks and quarterly dividends.
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Comments

  • Reply 1 of 24
    AvieshekAvieshek Posts: 100member
    The practice is happening in India too? 
  • Reply 2 of 24
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    Scot1
  • Reply 3 of 24
    smack416 said:
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    You can buy/sell them on online brokerages such as Fidelity or Schwab. I am sure others let you do it too.

    For example, you can choose from 37 different Apple bonds that currently trade on Fidelity.
    smack416
  • Reply 4 of 24
    MacProMacPro Posts: 18,011member
    smack416 said:
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    You can buy/sell them on online brokerages such as Fidelity or Schwab. I am sure others let you do it too.

    For example, you can choose from 37 different Apple bonds that currently trade on Fidelity.
    Pardon my ignorance too, but can you explain the point of buying Apple bonds over shares?  I assume it's risk aversion?
  • Reply 5 of 24
    I'd rather see a debt free company, than a larger cash hoard + increased debt...

    If Apple doesn't have plans to make huge acquisitions I don't get it.  Historically Apple makes small acquisitions.

    I assume this practice is a result of a broken tax policy that keeps oversees earning oversees.  Trump has said he's going to fix this... but Trump says at lot of things.  This has gone as far back as President Clinton, and is a popular election topic, but interest (in actually doing something) wanes once they get in office.

    I would like to know Apples plans, but the logic (as far as I can tell) is Bonds are a cheap way to grow the cash hoard, and the cash hoard does collect interest.  Plus bringing the cash oversees home is to expensive...

    I do wonder if this is a long term ploy to go Private.  At some point Apple's stock is going to decline in value, that cash could be used to buy the outstanding shares.

    Apple could benefit from being a Private company.  They currently face significant disruption with product launches do to leaks, and analysts (often false) speculation.

    There is not much point for Apple Analysts if a company doesn't have stock...  also, there could be reduced regulation burden.

    Apple could for example move their corporate headquarters to lessen the tax burden.  Congress currently gets pissed about things like reverse-mergers, but I'm not sure they can actually do anything if a US Private company moves oversees.



  • Reply 6 of 24
    SpamSandwichSpamSandwich Posts: 30,736member
    smack416 said:
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    Why not just buy AAPL stock?
  • Reply 7 of 24
    MacPro said:
    smack416 said:
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    You can buy/sell them on online brokerages such as Fidelity or Schwab. I am sure others let you do it too.

    For example, you can choose from 37 different Apple bonds that currently trade on Fidelity.
    Pardon my ignorance too, but can you explain the point of buying Apple bonds over shares?  I assume it's risk aversion?
    Gosh, that's a big question! To simplify, it's just a preference that, in general, someone might have for stocks (riskier investments, higher expected return) versus bonds (less risky investments, at least the investment grade ones, lower expected returns). Both are essential components of a portfolio, and depending on how aggressive or passive one wants to have as an investment strategy, one would choose a different mix.

    So, yes, it's quite closely related to one's tolerance for risk. Risk tolerance, in turn, could be a function of number of factors, the key ones being age, liquidity needs, tax planning (municipal bonds are tax-free, for instance), the type of activity that the investment is expected to fund (e.g., retirement versus a child's college education), etc.

    As the old adage goes, "do you like to eat well or sleep well"? :-)
    edited August 2017
  • Reply 8 of 24
    SpamSandwichSpamSandwich Posts: 30,736member
    Apropos of nothing, AAPL just hit an all-time intraday high:  $162.20.
    edited August 2017
  • Reply 9 of 24
    I will be so happy when Apple is able to repatriate that overseas cash with only a possible 10% tax hit. I so badly want Apple to be able to clear some of that debt. I understand why Apple is building up this debt but I'd like to see Apple once again become a relatively debt-free company. It's really odd how at one time it seemed as though Wall Street wanted Apple to take on debt but now that Apple has debt, they're still not happy about it. I thought what Apple is doing is a smart thing because interest rates are low. There seems to be an advantage for Apple to use that low-interest rate. I'm disappointed as POTUS doesn't seem to be doing very much to get those tax reforms pushed through and so Apple continues to take on more debt. The debt doesn't bother me very much because I'm getting my dividends. I'm only concerned if Wall Street considers this growing debt a drag on the company's value.

    Why is Apple being in focus for buying bonds and such? I'm sure there must be plenty of other companies who do this sort of thing. It seems like a straightforward way to generate cash and more people should be happy to get a piece of Apple. I see this as Apple being smart and using the system, so why do other people make like it's some problem. Do they really think Apple is doing something that's stupid? It sure seems as though Apple has more than enough cash flow to pay back that money. I honestly don't see what the big deal is.
    edited August 2017 radarthekat
  • Reply 10 of 24
    coolfactorcoolfactor Posts: 1,400member
    I'd rather see a debt free company, than a larger cash hoard + increased debt...


    I'm no expert, but it's been stated that a company is considered healthier when it has a certain amount of debt... or something like that.


  • Reply 11 of 24
    coolfactorcoolfactor Posts: 1,400member

    I will be so happy when Apple is able to repatriate that overseas cash with only a possible 10% tax hit.

    This continues to baffle me. Apple is a healthy company, even in the US. They have no cash shortage in North America that prevents them from doing anything they want. Yet Americans want that money "brought home". Why? What is the benefit? It doesn't belong to the US government or people. It belongs to Apple... overseas... where it was earned. That's where Apple can use it. 

    Scot1
  • Reply 12 of 24
    carnegiecarnegie Posts: 623member
    I'd rather see a debt free company, than a larger cash hoard + increased debt...

    If Apple doesn't have plans to make huge acquisitions I don't get it.  Historically Apple makes small acquisitions.

    I assume this practice is a result of a broken tax policy that keeps oversees earning oversees.  Trump has said he's going to fix this... but Trump says at lot of things.  This has gone as far back as President Clinton, and is a popular election topic, but interest (in actually doing something) wanes once they get in office.

    I would like to know Apples plans, but the logic (as far as I can tell) is Bonds are a cheap way to grow the cash hoard, and the cash hoard does collect interest.  Plus bringing the cash oversees home is to expensive...

    I do wonder if this is a long term ploy to go Private.  At some point Apple's stock is going to decline in value, that cash could be used to buy the outstanding shares.

    Apple could benefit from being a Private company.  They currently face significant disruption with product launches do to leaks, and analysts (often false) speculation.

    There is not much point for Apple Analysts if a company doesn't have stock...  also, there could be reduced regulation burden.

    Apple could for example move their corporate headquarters to lessen the tax burden.  Congress currently gets pissed about things like reverse-mergers, but I'm not sure they can actually do anything if a US Private company moves oversees.



    The main reason for taking on the debt is so that Apple can return capital to shareholders through dividends and share buybacks. Apple reached a point where it had plenty of cash, so it decided to start returning capital to shareholders rather than just building a bigger and bigger cash pile. Over the last 5 years Apple has returned essentially all of its profits to shareholders - more than $200 billion worth. So, in that time, its cash net of debt hasn't grown a lot (it has grown a little because there are differences between cash flows and profits).

    In order to return that much capital, Apple has had to borrow. A lot of its cash hasn't been remitted to the parent company because of the tax issues which you allude to, so that cash can't be used to buy back shares or pay dividends. But having a lot of debt isn't really a problem when you have that much cash on the other side of the ledger. It isn't costing Apple much to carry that debt as compared to just using its existing cash (even without considering the taxes Apple would have to pay if it repatriated that cash), because Apple is considered a good credit risk and thus can issue debt at fairly low interest rates. That interest is offset by the interest it earns on the money it is thusly holding on to. Much of the cash that Apple has is loaned to other companies, similar to how other entities are loaning Apple money.

    As for Apple going private: While that's theoretically possible, speaking practically it isn't really possible. Apple's market value is way too high. It would be incredibly difficult for someone (or, of course, a group of someone's) to pull together enough funding to take Apple private. It isn't going to happen, not anytime in the foreseeable future.
    edited August 2017 gatorguyRayz2016jony0
  • Reply 13 of 24
    gatorguygatorguy Posts: 20,037member
    carnegie said:
    I'd rather see a debt free company, than a larger cash hoard + increased debt...

    If Apple doesn't have plans to make huge acquisitions I don't get it.  Historically Apple makes small acquisitions.

    I assume this practice is a result of a broken tax policy that keeps oversees earning oversees.  Trump has said he's going to fix this... but Trump says at lot of things.  This has gone as far back as President Clinton, and is a popular election topic, but interest (in actually doing something) wanes once they get in office.

    I would like to know Apples plans, but the logic (as far as I can tell) is Bonds are a cheap way to grow the cash hoard, and the cash hoard does collect interest.  Plus bringing the cash oversees home is to expensive...

    I do wonder if this is a long term ploy to go Private.  At some point Apple's stock is going to decline in value, that cash could be used to buy the outstanding shares.

    Apple could benefit from being a Private company.  They currently face significant disruption with product launches do to leaks, and analysts (often false) speculation.

    There is not much point for Apple Analysts if a company doesn't have stock...  also, there could be reduced regulation burden.

    Apple could for example move their corporate headquarters to lessen the tax burden.  Congress currently gets pissed about things like reverse-mergers, but I'm not sure they can actually do anything if a US Private company moves oversees.



    The main reason for taking on the debt is so that Apple can return capital to shareholders through dividends and share buybacks. Apple reached a point where it had plenty of cash, so it decided to start returning capital to shareholders rather than just building a bigger and bigger cash pile. Over the last 5 years Apple has returned essentially all of its profits to shareholders - more than $200 billion worth. So, in that time, its cash net of debt hasn't grown a lot (it has grown a little because there differences between cash flows and profits).

    In order to return that much capital, Apple has had to borrow. A lot of its cash hasn't been remitted to the parent company because of the tax issues which you allude to, so that cash can't be used to buy back shares or pay dividends. But having a lot of debt isn't really a problem when you have that much cash on the other side of the ledger. It isn't costing Apple much to carry that debt as compared to just using its existing cash (even without considering the taxes Apple would have to pay if it repatriated that cash), because Apple is considered a good credit risk and thus can issue debt at fairly low interest rates. That interest is offset by the interest it earns on the money it is thusly holding on to. Much of the cash that Apple has is loaned to other companies, similar to how other entities are loaning Apple money.

    As for Apple going private: While that's theoretically possible, speaking practically it isn't really possible. Apple's market value is way too high. It would be incredibly difficult for someone (or, of course, a group of someone's) to pull together enough funding to take Apple private. It isn't going to happen, not anytime in the foreseeable future.
    Nicely explained. 
  • Reply 14 of 24
    carnegiecarnegie Posts: 623member

    MacPro said:
    smack416 said:
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    You can buy/sell them on online brokerages such as Fidelity or Schwab. I am sure others let you do it too.

    For example, you can choose from 37 different Apple bonds that currently trade on Fidelity.
    Pardon my ignorance too, but can you explain the point of buying Apple bonds over shares?  I assume it's risk aversion?
    The reason would be more of less the reason that people (or entities) buy bonds rather than stocks. They want a safer investment and are willing to accept (potentially) lower returns. Buying corporate bonds issued by a company like Apple likely means getting a little bit better returns than you would get from something like U.S. Treasuries with only a small perceived increase in the risk.

    When it comes to Apple's bonds versus Apple's stock in particular: One might think that the company is very stable - e.g., that there's almost no risk of default - even while they think that its stock might not be. One might think that the stock is overpriced at a given point or, even if they don't think that, that it's subject to the whims of equity markets. You can believe that a company is rock solid even while you think that the company's stock isn't, all things considered, a good (or safe) investment at a given price. And the same (potential) development which might send Apple stock down 20% in a week likely wouldn't send its bonds down 20%.
  • Reply 15 of 24
    carnegiecarnegie Posts: 623member


    I will be so happy when Apple is able to repatriate that overseas cash with only a possible 10% tax hit.

    This continues to baffle me. Apple is a healthy company, even in the US. They have no cash shortage in North America that prevents them from doing anything they want. Yet Americans want that money "brought home". Why? What is the benefit? It doesn't belong to the US government or people. It belongs to Apple... overseas... where it was earned. That's where Apple can use it. 

    If it wants to return capital to shareholders at (or near) the rate it has been, then it does have a cash shortage in the U.S. - i.e., the parent company (as distinguished from certain foreign subsidiaries) does. So without continual borrowing (or more repatriation), it can't do anything it wants. Being able to repatriate more of that cash would give it greater flexibility. It would mean that the cash could be used in more ways.
  • Reply 16 of 24

    I will be so happy when Apple is able to repatriate that overseas cash with only a possible 10% tax hit.

    This continues to baffle me. Apple is a healthy company, even in the US. They have no cash shortage in North America that prevents them from doing anything they want. Yet Americans want that money "brought home". Why? What is the benefit? It doesn't belong to the US government or people. It belongs to Apple... overseas... where it was earned. That's where Apple can use it. 

    No. It belongs to Apple's shareholders, almost all of whom are in the US.
  • Reply 17 of 24
    MacProMacPro Posts: 18,011member
    MacPro said:
    smack416 said:
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    You can buy/sell them on online brokerages such as Fidelity or Schwab. I am sure others let you do it too.

    For example, you can choose from 37 different Apple bonds that currently trade on Fidelity.
    Pardon my ignorance too, but can you explain the point of buying Apple bonds over shares?  I assume it's risk aversion?
    Gosh, that's a big question! To simplify, it's just a preference that, in general, someone might have for stocks (riskier investments, higher expected return) versus bonds (less risky investments, at least the investment grade ones, lower expected returns). Both are essential components of a portfolio, and depending on how aggressive or passive one wants to have as an investment strategy, one would choose a different mix.

    So, yes, it's quite closely related to one's tolerance for risk. Risk tolerance, in turn, could be a function of number of factors, the key ones being age, liquidity needs, tax planning (municipal bonds are tax-free, for instance), the type of activity that the investment is expected to fund (e.g., retirement versus a child's college education), etc.

    As the old adage goes, "do you like to eat well or sleep well"? :-)
    Thank you.  I'll take sleeping pills ;)
  • Reply 18 of 24
    I'm assuming some of the earlier bonds have been paid back / retired ? or is this bond debt just accumulating ?
  • Reply 19 of 24
    I'm assuming some of the earlier bonds have been paid back / retired ? or is this bond debt just accumulating ?
    A little bit of Apple's term debt has been paid back. That is to say, the principal has been: $2.5 billion from 2013 issuances, $2.5 billion from 2014 issuances, and $1.0 billion from 2015 issuances. Apple also makes regular interest payments on various outstanding issuances. Most of Apple's term debt has longer maturities though, so much of it won't be due for a while. Apple currently has about $96 billion worth of term debt outstanding.

    Apple does have a decent amount of commercial paper outstanding, about $12 billion worth. That debt comes due more often and is, in effect, regularly rolled over. The total amount of Apple's commercial paper that is outstanding has generally been growing over the last few years.
    stevedownunder
  • Reply 20 of 24
    smack416 said:
    Pardon my ignorance, but is there a way for the public to purchase these bonds?
    Why not just buy AAPL stock?
    In this case, I'm most curious because the bonds are available in CAD. I'm in Toronto and most of my available $$ are CAD. Every AAPL stock purchase I make I have to convert CAD to USD and get hit on the conversion rate.
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