Apple gearing up for sale of seven-part bond to fund share buybacks and dividends
Apple on Wednesday notified the U.S. Securities and Exchange Commission that it is planning yet another bond sale, accruing debt to fund its ongoing quarterly dividend payments and share repurchase program.
The Apple capital reinvestment program has been fueled in part by debt taken on by the company, and this latest round of share buybacks will be no different.
In the preliminary filing, Apple revealed its seven-part bond offering will feature floating rate notes due in 2017 and 2020, while the remaining fixed-rate notes will range from 2017 to 2045.
The bond sale will be operated by joint book running managers Goldman Sachs, Bank of America Merrill Lynch, and J.P. Morgan. Pricing on the bonds has not yet been revealed.
The company announced last week that it plans to add $50 billion to its massive capital return program, growing the share buyback component to $140 billion. That came alongside an 11 percent bump in its quarterly dividend paid to shareholders.
In total, Apple plans to return some $200 billion to shareholders by the end of March 2017. The company has already returned $112 billion since 2012, including $80 billion in stock buybacks.
The dividend will rise to 52 cents per share for shareholders of record as of the close of business on May 11. The previous dividend, paid in February, was set at 47 cents.
The Apple capital reinvestment program has been fueled in part by debt taken on by the company, and this latest round of share buybacks will be no different.
In the preliminary filing, Apple revealed its seven-part bond offering will feature floating rate notes due in 2017 and 2020, while the remaining fixed-rate notes will range from 2017 to 2045.
The bond sale will be operated by joint book running managers Goldman Sachs, Bank of America Merrill Lynch, and J.P. Morgan. Pricing on the bonds has not yet been revealed.
The company announced last week that it plans to add $50 billion to its massive capital return program, growing the share buyback component to $140 billion. That came alongside an 11 percent bump in its quarterly dividend paid to shareholders.
In total, Apple plans to return some $200 billion to shareholders by the end of March 2017. The company has already returned $112 billion since 2012, including $80 billion in stock buybacks.
The dividend will rise to 52 cents per share for shareholders of record as of the close of business on May 11. The previous dividend, paid in February, was set at 47 cents.
Comments
I’m ignorant. Can the general public buy these bonds? If so, how?
Does anyone know what Apple's total outstanding debt currently is? When talking about Apples total cash stockpile does the debt amount get reduced from that before the number is reported?
I'll never understand economics and financials enough to get a grasp on things like this. Companies with huge amounts of cash on hand borrow money? As an individual I would never take out a loan for something if I had sufficient cash. To scale it down: Apple has about $180B on hand and has $29B in long-term debt. Assume I have $180k on hand and want to purchase a $29k car. I would never take out a loan for that car even if it were a very low interest rate.
The vast majority of the "cash on hand" is held overseas and can't be paid as dividends or buybacks without repatriating it and paying the 35% US tax. That seems to be the main reason why they issue bonds.
Does anyone know what Apple's total outstanding debt currently is? When talking about Apples total cash stockpile does the debt amount get reduced from that before the number is reported?
http://money.cnn.com/quote/financials/financials.html?symb=AAPL&dataSet=BS and click on the financials tab.
Exactly, and in addition today "cost of money" is extremely low (sort-of 1% interest yearly).
So, better pay 1% interest on debt than 35% repatriating money.
What does Wall Street win? Fees to set up the bond sale. Fees to transact the bond sales. Fees to analyse the bonds. Fees to resell the bonds.
Losers? Shareholders, consumers, Steve Jobs.
You are trying to apply logic when talking with people brainwashed on Wall Street marketing memes.
Lest ye forget, a prominent executive from Goldman Sachs, hired some time ago, sits on Apple's board of directors and certainly would advise regarding this matter.
Wall Street wins.
What does Wall Street win? Fees to set up the bond sale. Fees to transact the bond sales. Fees to analyse the bonds. Fees to resell the bonds.
Losers? Shareholders, consumers, Steve Jobs.
And the US Government for having such high taxes for repatriation.
Wall Street wins.
What does Wall Street win? Fees to set up the bond sale. Fees to transact the bond sales. Fees to analyse the bonds. Fees to resell the bonds.
Losers? Shareholders, consumers, Steve Jobs.
Not really since as long as they can borrow money cheaper than what they make on *not paying dividend* on the shares they repurchase it's all a net plus for everyone. Except Steve who is as far as I know still dead.
Apple has had everything go it's way for a while now, somewhat of a perfect storm. Financial engineering via stock split, dividend increases & buybacks which helps increase EPS and lower dividend payout. Record institutional ownership and consistent upgrades from those institutions, unprecedented retail ownership, great iPhone sales, a bull market fueled by QE, increased cash stockpile (albiet not touchable). When market conditions change, and they always do some of these manuvers will no longer be viable. We are starting to get a look at that with stronger dollar, talk of rate increases, QE reduction / ending, etc... this is not good for Apple or the US economy.
I think the thing everyone overlooks is that "just sitting on the money" is bad. It's akin to holding money in your checking account and not the savings account.
For example, a company like Verizon or AT&T can use their "locked in contracts" as collateral to take on debt in the same way that Apple can use it's overseas holdings as collateral to take on debt here. By not doing so, the money loses value to inflation.
And bonds have such worthless interest rates right now, (remember they are locked in at the time of purchase) that anyone buying Apple bonds is just looking for a safe place to put their money that's better than inflation. If by chance inflation goes negative, then every country and corporation in the country is in trouble because their debt is instead growing with the devaluing of the dollar.
It's an excellent deal anyway as according to the previous loan docs they're only paying about 1% interest to a consortium of banks, which I assume includes the requirement that a significant amount of Apple's "overseas" money be deposited with them.
Lest ye forget, a prominent executive from Goldman Sachs, hired some time ago, sits on Apple's board of directors and certainly would advise regarding this matter.
That is so funny. A bit like asking a butcher if he thinks you should eat more meat.
Apple should borrow money from the European Central Bank since they are currently paying negative interest on deposits. They can't give that garbage away!
The negative interest rates apply to European banks and the negative rate is aimed at persuading them to lend to stimulate economic activity rather than sit on it. If they were giving it away i can assure you there would be no shortage of people to take it off their hands.
Guess I should've included the "/s" to emphasize that it was a joke.
I have to assume she was brought on board specifically for her experience in such matters and because of the relentless criticism of Apple's enormous cash holdings.