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Apple Reportedly Planning for Investor Call Today Ahead of New Bond Sale

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Original poster
Apr 12, 2001
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Apple is planning to hold an investor call today ahead of a potential bond sale, reports The Wall Street Journal. A banker working on the deal says that Apple may begin issuing bonds in Euros, as Deutsche Bank AG and Goldman Sachs Group are said to be arranging the call.
Deutsche Bank and Goldman Sachs Inc. are arranging a call for the firm with investors Monday, and a deal, possibly at least partly in euros, could come as soon as this week, according to a person familiar with the matter. The iPhone maker has never issued debt in currencies other than the dollar before.
Apple last entered the bond market in April with a $12 billion sale, which followed last year's $17 billion sale. The order book for Apple's bond offerings in April 2013 topped $40 billion, as investors oversubscribed and offered bids for more than twice the amount of debt issued. Apple's bond offerings are a part of its expanded capital return program, which centers around a major stock buyback program and a quarterly dividend. Apple has pledged to return more than $130 billion to shareholders by the end of 2015.

Article Link: Apple Reportedly Planning for Investor Call Today Ahead of New Bond Sale
 

maflynn

Moderator
Staff member
May 3, 2009
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Boston
I don't understand why they're selling bonds when they have so much cash in the bank :confused:
 
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Satori

macrumors 6502a
Jun 22, 2006
761
6
London
I don't understand why they're selling bonds when they have so much cash in the bank :confused:

I think that quite a lot of their cash reserves are held overseas and they would have to pay a lot of tax to bring it into the US.
 
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hydr

macrumors regular
Feb 25, 2009
226
95
I don't understand why they're selling bonds when they have so much cash in the bank :confused:

Tax purposes. They got a lot of offshore cash. Giving it back to investors will add additional taxes for bringing it back to the US first. Alternatively, they can sell bonds and pay interest with offshore cash. And pay dividends to shareholders.
 
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dnlklr

macrumors newbie
May 3, 2014
27
11
Interest rates on corporate bonds are historically extremely low right now.

So issuing debt now allows them to finance things like the capital return program and dividends more cheaply than using their foreign cash pile (the bulk of their savings) and bearing US tax losses when they repatriate those earnings .

tldr: Interest rate % for bonds are lower than tax rate % on cash

makes sense...
 
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keysofanxiety

macrumors G3
Nov 23, 2011
9,534
25,270
Interest rates on corporate bonds are historically extremely low right now.

So issuing debt now allows them to finance things like the capital return program and dividends more cheaply than using their foreign cash pile (the bulk of their savings) and bearing US tax losses when they repatriate those earnings .

tldr: Interest rate % for bonds are lower than tax rate % on cash

makes sense...

Cheers dude, I didn't really understand the article but you explained it really well.
 
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jlasoon

macrumors 6502a
Jun 1, 2006
505
627
Orlando, FL
I don't understand why they're selling bonds when they have so much cash in the bank :confused:

:apple: is holding the lowest amount of domestic cash since about March 2010. Roughly $18.1B. At this time the only thing driving the market is the Fed and stock buybacks. My guess is :apple: needs to buyback more stock, but doesn't have the money to do it.

The $120B offshore ain't coming back. For very obvious reasons. And domestic cash is running low. Issue bonds, buyback stock, pay dividend, everything looks good, everyone happy. Fed QE was $85B/month. Corporations are now repurchasing roughly $80B to $105B of their stocks every month. Welcome to the new normal.

Big difference between economy and market. This is the same strategy that was employed by IBM. And we all know how that worked out.
 
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Bonte

macrumors 6502a
Jul 1, 2002
997
203
Bruges, Belgium
Also, there pay very low interest rates, it's dumb not to loan at these conditions. I keep thinking Apple will do something with the cash, like building a city.

In all, Apple sold fixed-rate bonds maturing in three, five, seven, 10 and 30 years, and were priced to yield 1.068%, 2.108%, 2.889%, 3.460% and 4.483%, respectively.


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:apple: is holding the lowest amount of domestic cash since about March 2010. Roughly $18.1B. At this time the only thing driving the market is the Fed and stock buybacks. My guess is :apple: needs to buyback more stock, but doesn't have the money to do it.

Why does it need to buy more stock, is it to buy other company's with stock? It doesn't seem to help the stock very much, Apple is worth double the current price.
 
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bflowers

macrumors 6502a
Jul 19, 2006
632
132
I'm grateful for all the explanations, especially the link to the Forbes article. I was really at a loss for why they would be selling bonds but it makes perfect sense now. Thanks.

Our tax system is really screwed up. We tax every dollar multiple times. When a company earns it, when they use it to pay employees and again when we spend it. We even get taxed on Federal tax refunds! Fun stuff.
 
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nikaru

macrumors 6502a
Apr 23, 2009
654
602
I'm grateful for all the explanations, especially the link to the Forbes article. I was really at a loss for why they would be selling bonds but it makes perfect sense now. Thanks.

Our tax system is really screwed up. We tax every dollar multiple times. When a company earns it, when they use it to pay employees and again when we spend it. We even get taxed on Federal tax refunds! Fun stuff.

Many countries have participation exemption regime for foreign soruce dividends which means that any income derived from dividends distributed by Apple's subsidiaries offshore are tax exempt when you receive them (you dont pay income tax on those earnings). The reason for this exemption, and which US dont have, is because you already paid your taxes in the country where the profits were made, so logicall, you should not be taxed two times on the same income when you distributed this income as dividends to your shareholders (i.e. Apple Inc. as the parent company and beneficiery of the dividends).

So, what is cheaper if you need cash do pay to your shareholders in the US? Issue bonds on super low interest rate or take cash in the form of dividends from your rich subsidiaries offshore and paying 35% tax? If US dont change this and does not provide a tax holiday for certain amount of time, US would live always on debt, and less on equity and real cash.

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Tax efficient, you can set interest payments against profits so they can reduce the tax bill even further.

Well, thats not the main reason, although is a plus for this kind of operations. You see, the interest rate that a rich company like Apple is paying is minimum, becuase there is zero risk in mid-long term. Its like giving 20$ to Bill Gates because the ATM doesnt accept his credit card and thinking if he would be able to give you back the money. Hell yes. That the reason why Apple bond is probably the safes investment you can make after the Switzerlands public bonds.
 
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aaarrrgggh

macrumors regular
Jul 1, 2007
159
24
Currency Hedge

Aside from the tax benefits, this would seem like a currency hedge to limit risk in dollar terms. Declining Euro liky hit Apple last quarter. What they raise in bonds directly eliminates currency exposure.
 
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ElectronGuru

macrumors 68000
Sep 5, 2013
1,521
372
Oregon, USA
Our tax system is really screwed up. We tax every dollar multiple times. When a company earns it, when they use it to pay employees and again when we spend it. We even get taxed on Federal tax refunds! Fun stuff.


We tax money every time it moves. The alternative is taxing money when it doesn't, like we do with property. A wealth tax.
 
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scbn

macrumors 6502
Jul 25, 2010
272
22
I understand that if they bring back the overseas cash to pay dividend or buy back shares, they will have to pay the 35% tax rate. But I'm not quite sure for the reasons to issue bonds in euro. Does AAPL trade in Frankfurt? Maybe they want to buy back shares over there, too.
 
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Crzyrio

macrumors 68000
Jul 6, 2010
1,506
914
Some one more knowledgeable Care to chime in as to how this announcement might effect the stock?
 
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