Apple cutting back on bond buys ahead of plans to repatriate foreign cash

Posted:
in AAPL Investors
As it gets ready to bring billions in foreign cash back to the U.S., Apple is also reportly drawing back on its purchases of corporate bonds.




Some $157 billion of Apple's $285 billion in cash reserves are sunk into corporate debt, making it one of the world's leading lenders, Bloomberg said on Tuesday. Sources didn't offer any more details, except to note that other major tech companies like Alphabet and Oracle are also holding off on bond buys.

At least some of the businesses are taking advantage of a drastic tax cut on repatriated money and liquid securities by the Trump administration, down from 35 percent to just 15.5 percent. While Apple has regularly clashed with Trump and the Republican Party on issues like immigration, privacy, and LBGT rights, it has eagerly accepted the corporate tax break.

The company is expecting to pay a $38 billion bill on the repatriated money, which it's counting towards plans to pump $350 billion into the U.S. economy within the next five years. Some of the company's investments will include a new campus, 20,000 jobs, and more domestic manufacturing.

Apple long refused to bring cash back to the U.S. unless it was granted a tax "holiday," something its lobbyists actively campaigned for. The Obama administration never backed down, presumably worried about hurting government budgets.
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Comments

  • Reply 1 of 23
    eightzeroeightzero Posts: 1,998member
    I think their plan is to stop selling bonds, not buying them, right? IOW, they will stop issuing debt?
  • Reply 2 of 23
    MacProMacPro Posts: 17,291member
    Saying Apple has 'eagerly accepted' the corporate tax break is a little disingenuous wording, Tim had been  lobbying for such a tax break for years.  
    SpamSandwichRayz2016mike1bshankjony0
  • Reply 3 of 23
    maestro64maestro64 Posts: 4,101member
    MacPro said:
    Saying Apple has 'eagerly accepted' the corporate tax break is a little disingenuous wording, Tim had been  lobbying for such a tax break for years.  

    yes, and to be a little more accurate and I love Tim for this, Congress and in their typical dog and pony show to try and prove to the people they were doing something, they drag Tim in front of the camera's and make an example of him and get him to admit they were doing something morally wrong possibly illegal. Only to have Tim turn it around and said he only following the laws they put in place, and those law do not tax money made outside the US. He said if they want a different outcome they need to change their laws and only they could change the laws. He was not really advocating the tax reduction to bring the money home. In some regards it actually better for apple to take on the debt since it reduce overall taxes in the US.
    MacProadm1
  • Reply 4 of 23
    eightzero said:
    I think their plan is to stop selling bonds, not buying them, right? IOW, they will stop issuing debt?
    That was my first thought.  However, on further reflection   - the focus of the article is on Apple's cash.  The article mentions that apple is one of the world's leading lenders, etc.  So this is about Apple investing its cash in corporate bonds.  Apple is simultaneously buying bonds (overseas, un-repatriated earnings) and selling bonds (US, US-earned or repatriated earnings).  I'd assume they cut back on both as there would not be so much need to do that. 
    tmay
  • Reply 5 of 23
    fallenjtfallenjt Posts: 3,833member
    eightzero said:
    I think their plan is to stop selling bonds, not buying them, right? IOW, they will stop issuing debt?
    Nope. Apple has been using cash abroad to purchase US corporate bonds instead of repatriating it. That's one of the legal investments with cash available outside of US. It's not Apple bond.
    daven
  • Reply 6 of 23
    eightzeroeightzero Posts: 1,998member
    fallenjt said:
    eightzero said:
    I think their plan is to stop selling bonds, not buying them, right? IOW, they will stop issuing debt?
    Nope. Apple has been using cash abroad to purchase US corporate bonds instead of repatriating it. That's one of the legal investments with cash available outside of US. It's not Apple bond.
    OK, thanks. I think I see now. 
    edited February 6
  • Reply 7 of 23
    prokipprokip Posts: 133member
    So Apple involves itself in issues that have nothing to do with producing good products and running a successful business such as immigration and LBGT+ issues that are the political play things of left ideology and the Democrats in the US.  But it is the the right and the Republicans who really give a rats about Apple's (and other corp's businesses) by giving them a partial holiday on repatriated cash.  But of course there is no heartfelt "thank you" from Tim and his silly idealogues at Apple for helping the business.
    It's time for corporate heavies to acknowledge those who really do care about the success of their enterprises, not just social media's "warm and fuzzies".
    holysmokesadm1
  • Reply 8 of 23
    blastdoorblastdoor Posts: 1,816member
    Interesting. So Apple bought bonds using foreign cash, then sold their own bonds in the US market to finance dividends and cash buybacks. 

    Presumably now both the buying and selling of bonds will cease, resulting in a negligible impact on the overall bond market. Presumably the only people who will lose are the finance companies that broker the bond sales. 
  • Reply 9 of 23
    davendaven Posts: 457member
    I wonder how much Apple will up their dividend.
  • Reply 10 of 23
    fastasleepfastasleep Posts: 1,438member
    prokip said:
    So Apple involves itself in issues that have nothing to do with producing good products and running a successful business such as immigration and LBGT+ issues that are the political play things of left ideology and the Democrats in the US.  But it is the the right and the Republicans who really give a rats about Apple's (and other corp's businesses) by giving them a partial holiday on repatriated cash.  But of course there is no heartfelt "thank you" from Tim and his silly idealogues at Apple for helping the business.
    It's time for corporate heavies to acknowledge those who really do care about the success of their enterprises, not just social media's "warm and fuzzies".
    Your premise is flawed — they involve themselves in immigration and LGBT issues because a) those policies affect thousands of their employees, and b) supporting an inclusive society is seen by them as the right thing to do, because they’re not garbage people. Not everything is a political “plaything” just because you don’t like it. You think all of the major tech companies speaking out against xenophobic policies are going for “warm and fuzzies”? There are people’s lives at stake. 
    MacProciaGeorgeBMac
  • Reply 11 of 23
    plovellplovell Posts: 768member
    prokip said:
    So Apple involves itself in issues that have nothing to do with producing good products and running a successful business such as immigration and LBGT+ issues that are the political play things of left ideology and the Democrats in the US.  But it is the the right and the Republicans who really give a rats about Apple's (and other corp's businesses) by giving them a partial holiday on repatriated cash.  But of course there is no heartfelt "thank you" from Tim and his silly idealogues at Apple for helping the business.
    It's time for corporate heavies to acknowledge those who really do care about the success of their enterprises, not just social media's "warm and fuzzies".
    Apple cares about running its business and the most important part of that is its employees. Apple does not have, as you insinuate, a political agenda but does what is best for its own business and, to the extent possible, the world at large. This might not mesh with with your clearly-poitical agenda but that's OK - you're entitled to your opinion. I believe it's wrong, and that's the opinion to which I'm entitled.
    fastasleepGeorgeBMac
  • Reply 12 of 23
    plovellplovell Posts: 768member
    daven said:
    I wonder how much Apple will up their dividend.
    From what I hear, not much. The shareholder return will be through share buybacks. That should be MASSIVE and I don't understand why the price is flat.
  • Reply 13 of 23
    adm1adm1 Posts: 808member
    plovell said:
    prokip said:
    ...
    ... Apple does not have, as you insinuate, a political agenda ...
    so why lobby the government so hard? spending on lobbying by Apple has almost doubled since Trump took office. Also, paying as little tax as possible via any loopholes possible does not translate into doing "what is best for the world at large." in my eyes, that's purely whats best for profits.
  • Reply 14 of 23
    GeorgeBMacGeorgeBMac Posts: 2,264member
    prokip said:
    So Apple involves itself in issues that have nothing to do with producing good products and running a successful business such as immigration and LBGT+ issues that are the political play things of left ideology and the Democrats in the US.  But it is the the right and the Republicans who really give a rats about Apple's (and other corp's businesses) by giving them a partial holiday on repatriated cash.  But of course there is no heartfelt "thank you" from Tim and his silly idealogues at Apple for helping the business.
    It's time for corporate heavies to acknowledge those who really do care about the success of their enterprises, not just social media's "warm and fuzzies".
    Nice spin Comrade!   There will be more rubels in your next pay check.
  • Reply 15 of 23
    GeorgeBMacGeorgeBMac Posts: 2,264member
    daven said:
    I wonder how much Apple will up their dividend.
    Apple has been financing its high dividends and buy-backs through it's borrowings.  Now they won't have to borrow.   So, I don't see any influx of cash for either dividends or buy backs...
  • Reply 16 of 23
    With bond rates on the rise, and expected by many to rise a fair bit further, corporate bonds aren't as good an investment right now. If you buy now and rates rise a lot in the short term, you're either locked into a rate than you could have gotten later or you take a loss selling the bonds you bought when yields were lower. Of course, if you have cash you need to park, you can't wait forever to buy bonds and such just because rates are rising. But if you expect them to rise a lot over the next fairly short period of time, it may make sense to wait until they do before buying a lot (more) of them. In the meantime you can park cash in shorter term instruments (or in shorter term corporate bonds).

    That said, yeah... with the recent tax law changes I wouldn't expect Apple to take on new debt at the rate it had been nor hold on to as much generated cash (e.g. in the form of corporate bonds) as it had. Whatever it does with its net-cash, and over whatever time frame it does that, Apple likely won't continue to grow outstanding debt and offsetting cash holdings as fast as it did before.
  • Reply 17 of 23


    ...

    Some $157 billion of Apple's $285 billion in cash reserves are sunk into corporate debt, making it one of the world's leading lenders, Bloomberg said on Tuesday. Sources didn't offer any more details, except to note that other major tech companies like Alphabet and Oracle are also holding off on bond buys.

    ...

    A small clarification: It's more like $162 billion in corporate debt that Apple held as of the end of this past quarter. It held $157 billion in corporate securities and another $5 billion in commercial paper. Commercial paper is, for the most part, corporate debt. It's just shorter term debt.
  • Reply 18 of 23
    MacPro said:
    Saying Apple has 'eagerly accepted' the corporate tax break is a little disingenuous wording, Tim had been  lobbying for such a tax break for years.  

    I think Apple's quite happy with the recent tax law changes But, while in major ways they are what Apple's advocated for, in other significant ways they aren't

    Corporate tax laws are actually more complicated now, at least when it comes to foreign earnings - i.e., earnings of controlled foreign corporations. I think Apple would have liked to seen a significant simplification of corporate tax laws, not new levels of complexity. Mr. Cook has, in the past, advocated for a lowered rate with an elimination of all (or most all) corporate expenditures. That may have actually increased Apple's tax liability some, but it would have been worth it because of the simplification and flexibility that would come from fuller access (at a lowered tax rate) to foreign earnings.
  • Reply 19 of 23

    maestro64 said:
    MacPro said:
    Saying Apple has 'eagerly accepted' the corporate tax break is a little disingenuous wording, Tim had been  lobbying for such a tax break for years.  

    yes, and to be a little more accurate and I love Tim for this, Congress and in their typical dog and pony show to try and prove to the people they were doing something, they drag Tim in front of the camera's and make an example of him and get him to admit they were doing something morally wrong possibly illegal. Only to have Tim turn it around and said he only following the laws they put in place, and those law do not tax money made outside the US. He said if they want a different outcome they need to change their laws and only they could change the laws. He was not really advocating the tax reduction to bring the money home. In some regards it actually better for apple to take on the debt since it reduce overall taxes in the US.
    Taking on more debt, rather than spending cash holdings, doesn't really reduce Apple's overall income taxes in the United States. At least, it only does so to the extent Apple is paying more in interest on the money it borrowed than it's getting in return on the money it's, as a result, still holding. In that case, Apple's still seeing a net loss by borrowing money rather than spending cash holdings.

    As it is, Apple has to (and has long had to) pay U.S. income taxes on the passive earnings from its cash holdings, even if those holdings aren't repatriated. It's Subpart F income. So spending that cash (and thus losing the interest earned on it) reduces Apple's U.S. income taxes just as borrowing money (and thus deducting the interest paid on it) does.
  • Reply 20 of 23
    maestro64maestro64 Posts: 4,101member
    prokip said:
    So Apple involves itself in issues that have nothing to do with producing good products and running a successful business such as immigration and LBGT+ issues that are the political play things of left ideology and the Democrats in the US.  But it is the the right and the Republicans who really give a rats about Apple's (and other corp's businesses) by giving them a partial holiday on repatriated cash.  But of course there is no heartfelt "thank you" from Tim and his silly idealogues at Apple for helping the business.
    It's time for corporate heavies to acknowledge those who really do care about the success of their enterprises, not just social media's "warm and fuzzies".
    The reason Apple and many companies pander to the these groups is because they are the most vocal of all groups. The people who are pro business and pro individuals are too busy making a living to spend their time callout companies. Apple knows if they are not on the right side of these vocal groups there will be a fire storm of bad press for them. I have worked for large companies and we hear all the time about brand image and the company has to do things to protect the brand which includes the behavior of every employee. My experience is most of these actions has nothing to do with being altruistic to these issues it all about making money. Employees feel good since they think they are somehow helping but in the end it is about keeping the money flowing. If a different group began to be louder, companies will change directions.

    One simple example I have talked about this before. Apple gets flack about labor abuses in China, even though Apple does not employee any of these workers and China already has laws in place to protect workers, but does not enforce them. So Apple gets attached since China gives the middle finger to these groups so these groups go after Apple since they know Apple will need to respond or the brand will suffer. In the mean time Apple spends lots of time and money fixing the public image in the mean time 1000 other US companies manufacturing in China have workers still being abused and the problem is not fixed by those groups feel good since they got apple to respond to them.


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