Apple sells $7B in debt in first bond offer since $285B cash repatriation [u]
Apple is getting ready to offer bonds for the first time in almost two years, looking to raise cash to fund share buybacks and other activities without needing to use its repatriated cash hoard.
A preliminary prospectus for the bond market offering was published to Apple's investor relations site on Wednesday, albeit in an incomplete state. The SEC filing did not reveal how much Apple is looking to raise from the bond sale, but a follow-up report from Bloomberg puts the figure at $7 billion.
Under the "Use of Proceeds" section of the filing, Apple plans to use the cash raised "for general corporate purposes, including repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions, and repayment of debt."
Apple revealed in its April quarterly results the company would be raising its share buyback program value to $75 billion. At the same time, Apple raised the quarterly dividend by 5%, paying more to shareholders over time.
It also advises the company may temporarily invest funds that are not immediately needed in other short-term investments.
The bond offering is unusual, as Apple has not made any such moves since late 2017. It also marks the first time since the company took advantage of tax rule changes to bring $285 billion in cash reserves stored overseas to the United States.
As Apple still has $211 billion on hand, it may appear to be counterintuitive to perform a bond offering, but it is an easier way for Apple to raise funds. The currently low yields of US Treasury bonds could make Apple's bonds a better deal to potential investors, with the cost to Apple likely to be far lower than if it were to borrow the same cash via other means.
Updated with information from Bloomberg.
A preliminary prospectus for the bond market offering was published to Apple's investor relations site on Wednesday, albeit in an incomplete state. The SEC filing did not reveal how much Apple is looking to raise from the bond sale, but a follow-up report from Bloomberg puts the figure at $7 billion.
Under the "Use of Proceeds" section of the filing, Apple plans to use the cash raised "for general corporate purposes, including repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions, and repayment of debt."
Apple revealed in its April quarterly results the company would be raising its share buyback program value to $75 billion. At the same time, Apple raised the quarterly dividend by 5%, paying more to shareholders over time.
It also advises the company may temporarily invest funds that are not immediately needed in other short-term investments.
The bond offering is unusual, as Apple has not made any such moves since late 2017. It also marks the first time since the company took advantage of tax rule changes to bring $285 billion in cash reserves stored overseas to the United States.
As Apple still has $211 billion on hand, it may appear to be counterintuitive to perform a bond offering, but it is an easier way for Apple to raise funds. The currently low yields of US Treasury bonds could make Apple's bonds a better deal to potential investors, with the cost to Apple likely to be far lower than if it were to borrow the same cash via other means.
Updated with information from Bloomberg.
Comments
An old mentor of mine said the best money to spend was someone else’s, especially if it’s free.
There's a reason they've stopped reporting how much of it is held "overseas", as have many other big companies such as Google, Microsoft, Oracle....
https://www.bloomberg.com/news/articles/2018-12-19/u-s-offshore-repatriated-cash-fell-almost-50-in-third-quarter
The Isle of Jersey is probably still a thing.
So, a nearly cost free way for Apple to buy back its own stock. Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years
The company is simply borrowing against the money they already have in the bank (overseas) because it's financially advantageous. They're not going into the red, so your trepidations, much less calling their decision "financial engineering", make no sense to me.
This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices. But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
The Apple stock that is repurchased is retired, burned in effect, and has no residual book value. Indisputable fact.
Is that better?
On top of that there is no evidence you could offer that the stock repurchases have been effective in raising Apple stock price above the level it would have been anyway if the repurchase program did not exist in the form it does.