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Apple Looking to Raise $3.5 Billion From Bond Sale Involving Euros [Updated]

MacRumors

macrumors bot
Original poster
Apr 12, 2001
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Following yesterday's report that Apple was preparing to hold a new bond sale that includes a component denominated in euros, the company today filed a prospectus with the Securities and Exchange Commission outlining its general plans, which include two chunks of debt with staggered maturities. The Wall Street Journal has more details on the prospectus and how its yields will be the lowest ever for 8-year and 12-year debt:
The iPhone maker is seeking to raise at least EUR1 billion ($1.2 billion) from two chunks of euro debt maturing in eight and 12 years.

Those would beat the lowest yields ever paid for euro-denominated, corporate bonds of these maturities, according to Dealogic data, reflecting solid confidence that the bonds represent a safe bet. Bankers managing the bond sale suggested the eight-year notes will give investors a yield of roughly 1.1% and the 12-year notes around 1.7%.

Apple spoke with investors on Monday about issuing bonds and will use the proceeds of the sale for general corporate purposes, including share buybacks and dividend payments.
This would mark first time that Apple would begin issuing bonds in euros, with Deutsche Bank and Goldman Sachs arranging the sale. This past April, Apple held a $12 billion bond sale, which followed a record $17 billion sale last year. Apple's bond offerings are a part of its expanded capital return program, which primarily involves a major stock buyback program and a quarterly dividend that aims to return more than $130 billion to shareholders by the end of 2015.

Update: The Wall Street Journal has revised its article to note Apple is actually looking to raise EUR2.8 billion ($3.5 billion) in the bond sale.

Article Link: Apple Looking to Raise $3.5 Billion From Bond Sale Involving Euros [Updated]
 

TallManNY

macrumors 601
Nov 5, 2007
4,370
1,235
Chump change. What's the point of Apple doing such a small issuance?
 
Comment

Freida

macrumors 68030
Oct 22, 2010
2,883
3,964
what is the benefit of buying these bonds for such a long time when in 12 years the inflation will depreciate it? ie. if i buy 1000EUR today and will get 1000EUR in 12 years then the value i can buy wit it will probably be something like 800EUR.
Or is the interest on those so high that I will actually profit from it?
Can someone with more knowledge give me little bit of a clarification so I can learn, please?
Thank you
 
Comment

whooleytoo

macrumors 604
Aug 2, 2002
6,583
668
Cork, Ireland.
I wonder if anyone in Apple even remembers what "cash flow problems" means. I go to the ATM, and it just laughs at me. Apple heads over to Europe to pick up €1.2billion on a whim. I wonder what happened? They impulse-bought a small South American country but forgot to bring their wallet?
 
Comment

foobarbaz

macrumors 6502a
Nov 29, 2007
585
743
Euro? Bit risky with a currency that almost bankrupted itself?

Obviously you were just trying to be clever and don't know much about finance.

If you assume the Euro might be worthless soon, then taking debt in Euro is not a risk. As the Euro falls, your debt (measured in USD) decreases.

The risk, however, is that the Euro is somewhat low at the moment. If it gains (the USD falls), the debt will increase.

Generally speaking, EUR/USD is somewhat stable, though. It has been circling 1.30 EUR/USD for a decade.
 
Comment

centauratlas

macrumors 65816
Jan 29, 2003
1,338
2,167
Florida
what is the benefit of buying these bonds for such a long time when in 12 years the inflation will depreciate it? ie. if i buy 1000EUR today and will get 1000EUR in 12 years then the value i can buy wit it will probably be something like 800EUR.
Or is the interest on those so high that I will actually profit from it?
Can someone with more knowledge give me little bit of a clarification so I can learn, please?
Thank you


The interest rate was 1.1 or 1.7% depending on the term according to the article and summary. So, the rate is quite low, and probably won't even cover the inflation rate.

You are correct though, it makes little sense to buy the bonds for the average person, but lots of sense for Apple to issue these. They get 1000 Euro today and get to repay 800 Euro in the future.
 
Comment

WBRacing

macrumors 65816
Nov 19, 2012
1,310
2,984
UK
The Carl Ichan effect.

Whenever I hear of anything relating to financial strategy I immediately imagine that locust whispering in the boards ear.
 
Comment

Freida

macrumors 68030
Oct 22, 2010
2,883
3,964
The interest rate was 1.1 or 1.7% depending on the term according to the article and summary. So, the rate is quite low, and probably won't even cover the inflation rate.

You are correct though, it makes little sense to buy the bonds for the average person, but lots of sense for Apple to issue these. They get 1000 Euro today and get to repay 800 Euro in the future.

So the question is: Why would anyone buy it from them if inflation will make you lose money?
 
Comment

Ritstu

macrumors newbie
Nov 4, 2014
1
0
So the question is: Why would anyone buy it from them if inflation will make you lose money?

So I'm guessing that you don't have any money that is saved in a Money Market account, a savings account, or a checking account that pays interest? What about CDs? All of these will not make money over inflation (in a typical inflation year - obviously not when it's 0%), yet people keep their money in them due to the fact that they are safe and liquid.

Buying these bonds, while they may not be as liquid, is a safe investment that could be sold before maturity if needed. You get a better rate with these bonds than the majority of accounts that are available that I listed above.

Personally, I agree with your statement that I wouldn't buy them just because I prefer riskier investments but there is definitely a place in the market for these and they will be bought up quickly when they go to market.
 
Comment

Glenny2lappies

macrumors 6502a
Sep 29, 2006
501
117
Brighton, UK
Tax?

It's odd that they're selling the bonds for very little and using this for dividends & buybacks, so are deferring the payments. Smells a little wiffy.

I'd wager that it's a tax dodge. So Apple won't pay for any schools & hospitals.
 
Comment

teslo

macrumors 6502a
Jun 9, 2014
929
599
"intelligent assessment of the situation... ummmm... apple... lawyers. bonds. dividends..."

how'd i do? :cool:
 
Comment

throttlemeister

macrumors 6502a
Mar 31, 2009
550
63
Netherlands
Euro? Bit risky with a currency that almost bankrupted itself?

*snicker*

You mean that currency that was designed to be 1:1 to the US$, but dropped to $0.8 after its introduction and then climbed to be over $1.50. And then in the American induced crisis went down to fluctuate mostly between $1.30 and $1.40? That currency?

You shouldn't believe all that you see on Fox mate. In fact, you probably shouldn't believe anything you see on Fox, but that's a different discussion.
 
Comment

bruns

macrumors newbie
Nov 4, 2014
1
0
The allmighty nothing

This is simply a smart business decision by Apple. They will invariably be the first trillion dollar public company soon enough.

For those that comment on Apple & co needing to pay their taxes, and the addicted that ignorantly say that technology is the all important stuff of life, yes, Apple is worth an obscene amount, making mega profits, so more than the adequate amount of tax should be unquestionably payed back by all these absconders.
There's way too much protection for the dictators of the country (big business), whilst the rest suffer. To exalt these companies for making trinkets is an exercise in ignorance.
As for technology being the be all, that's only in the case of development of necessary tools, such as in medical technology, communication, mapping, exploration. The rest is just fodder for the mindlessly addicted.
 
Comment

nikaru

macrumors 6502a
Apr 23, 2009
668
610
I wonder if anyone in Apple even remembers what "cash flow problems" means. I go to the ATM, and it just laughs at me. Apple heads over to Europe to pick up €1.2billion on a whim. I wonder what happened? They impulse-bought a small South American country but forgot to bring their wallet?


When you cant use your cash you have cash-flow problems, yes. I dont see the point however in the buy-back program and paying ridicously small dividends to shareholders, but maybe Im not that smart.
 
Comment

IJ Reilly

macrumors P6
Jul 16, 2002
17,889
1,478
Palookaville
So I'm guessing that you don't have any money that is saved in a Money Market account, a savings account, or a checking account that pays interest? What about CDs? All of these will not make money over inflation (in a typical inflation year - obviously not when it's 0%), yet people keep their money in them due to the fact that they are safe and liquid.

Buying these bonds, while they may not be as liquid, is a safe investment that could be sold before maturity if needed. You get a better rate with these bonds than the majority of accounts that are available that I listed above.

Personally, I agree with your statement that I wouldn't buy them just because I prefer riskier investments but there is definitely a place in the market for these and they will be bought up quickly when they go to market.

In short, bonds are a part of any diversified portfilio.
 
Comment

Freida

macrumors 68030
Oct 22, 2010
2,883
3,964
So I'm guessing that you don't have any money that is saved in a Money Market account, a savings account, or a checking account that pays interest? What about CDs? All of these will not make money over inflation (in a typical inflation year - obviously not when it's 0%), yet people keep their money in them due to the fact that they are safe and liquid.

Buying these bonds, while they may not be as liquid, is a safe investment that could be sold before maturity if needed. You get a better rate with these bonds than the majority of accounts that are available that I listed above.

Personally, I agree with your statement that I wouldn't buy them just because I prefer riskier investments but there is definitely a place in the market for these and they will be bought up quickly when they go to market.

You are right, I don't. I'm probably like you as I prefer to invest in stock or if I want to be safe then I will invest in Premium Bonds here in UK as they do a lottery thing which for me turned out to give me more than a bank but its all about luck. But I got few times £50 or £25 which made it worth while :)
I now see the point you pointed out. Guess it does make sense although I think that there are better ways to make interest on your money. :)
 
Comment

Babbles

macrumors newbie
Apr 10, 2014
15
0
U.S.A
Obviously you were just trying to be clever and don't know much about finance.

If you assume the Euro might be worthless soon, then taking debt in Euro is not a risk. As the Euro falls, your debt (measured in USD) decreases.

The risk, however, is that the Euro is somewhat low at the moment. If it gains (the USD falls), the debt will increase.

Generally speaking, EUR/USD is somewhat stable, though. It has been circling 1.30 EUR/USD for a decade.

This is a great yet simple explanation. This is knowledge people should absorb for future understanding.
 
Comment

rmsanger

macrumors regular
Jul 23, 2014
114
26
Right because not having enough cash on hand was their problem. :rolleyes:

I guess it will depend on how they reinvest the new capital; maybe a swiss watch company?
 
Comment

jetlife2

macrumors regular
Apr 18, 2004
129
9
Cincinnati, Oh
Great deal for shareholders

It is amazing they command such a low interest rate for corporate bonds. This is a great deal for the company and shareholders. Using the proceeds for share buybacks and dividend payments is very smart. On the other side of the deal, as a corporate bond investor they will be on the lowest risk, lowest return side of the spectrum and will make a great anchor for a bond portfolio.
 
Comment

Sandstorm

macrumors 6502a
Sep 27, 2011
641
1,466
Riga, Latvia
Euro? Bit risky with a currency that almost bankrupted itself?

Euro as a currency had a turbulent time (very much thanks to the US crisis), but massive stabilising and safeguarding measures have been taken and it's here to stay. Simply too much is at stake.

My country joined the Euro January 1st of this year and I have zero complaints. BTW, in two months yet another EU country is joining the Eurozone - our southern neighbour Lithuania. Likely to be followed by Poland in not so distant future.
 
Comment

groovyd

Suspended
Jun 24, 2013
1,227
621
Atlanta
Apple would make a great country to live in ;) atleast the most fiscally stable country in the world.
 
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