Apple to Fund Stock Buybacks and Dividends Through Another $5B Bond Sale

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As Apple prepares to launch a new line of iPhones next week, the company is selling another round of bonds to further fund share buybacks and dividends, reports Bloomberg. Apple plans to offer $5 billion of debt in four parts to raise cash for its current capital return program.
The iPhone maker is offering $5 billion of debt in four parts, after dropping a two-year floating rate component, according to a person with knowledge of the matter. The longest portion of the sale, a 30-year security, may yield 1.1 percentage points above Treasuries, down from initial talk of around 1.25 percentage points, said the person, who asked not to be identified because the deal is private.
In August, Apple CFO Luca Maestri said Apple had completed $222.9 billion of its $300 billion capital return program, which is set to last through 2019. That figure includes $158.5 billion in share repurchases.

At the beginning of July Apple held over $261.5 billion in cash and marketable securities, but approximately 94 percent of that money is held overseas. It would cost Apple upwards of 35 percent in taxes to repatriate its overseas cash, so Apple uses debt markets to raise money more cheaply.

Apple's upcoming bond sale follows $7 billion in debt raised in a six-part bond sale in May of 2017.

Article Link: Apple to Fund Stock Buybacks and Dividends Through Another $5B Bond Sale
 

jimthing

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This is not a criticism, well ... perhaps just a bit :) Steve Jobs was all about "no debt, don't listen to irate investors", while Tim has embraced debt issues to appease investors. Personally, I liked Steve's approach much better, since it aligns with my own perspectives.
That may be a short term issue for a growing company during Jobs' period. But established ones holding large capital reserves don't have this issue, as clearly borrowing is cheaper than the tax bill.

It'd be silly to bring money into the US and pay 35%+ on it, when you can lend at a fraction of that rate.
 

john123

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This is not a criticism, well ... perhaps just a bit :) Steve Jobs was all about "no debt, don't listen to irate investors", while Tim has embraced debt issues to appease investors. Personally, I liked Steve's approach much better, since it aligns with my own perspectives.
The criticisms of debt financing in the literature don't really apply in this case. That's why net debt, which takes into account cash and cash equivalents, is a better measure.
 

jimthing

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I should add, that obviously any tax holiday the US government might offer, would likely be Apple's only real chance to repatriate funds. And they'd surely jump at the chance, even if it was only halved from around 35 to 20%.

However, such holidays would likely be dependent on Apple making some small moves on US job creation, to appease govt pressure, as a kind of quid pro quo. But that doesn't mean a massive increase in production being undertaken in the US, but rather much smaller moves to create jobs, perhaps in Apple's increasing service sector (eg. tech support, et al.). The expertise held in China's workforce and humongous factory cities infrastructure, along with the obvious labour cost differences, make major manufacturing in the US (or even Africa for that matter; as they don't have the infrastructure either at this stage), highly unlikely.
 
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thisisnotmyname

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This is not a criticism, well ... perhaps just a bit :) Steve Jobs was all about "no debt, don't listen to irate investors", while Tim has embraced debt issues to appease investors. Personally, I liked Steve's approach much better, since it aligns with my own perspectives.
It's not really debt. I haven't looked at the details but they'll probably take the loan from one of the cash rich subsidiaries (Ireland?) and get money off the books.
 

RogerWilco

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Jul 29, 2011
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Nothing says Sillycon Valley ethos like a debt-funded share repurchase plan. Modern, sanitary, and totally bereft of any benefit to the mass of humanity living outside the bubble.
 
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e-coli

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Jul 27, 2002
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This is actually slightly concerning. With the stock at an all time high, and certain to go higher with iPhone 8, you have to wonder why they're inflating the share price.

Perhaps this means a leveraged buyout of a very expensive company in the near future?

EDIT: I read the article. Get what they're saying, but still think the above applies.
 
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Carnegie

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May 24, 2012
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It's not really debt. I haven't looked at the details but they'll probably take the loan from one of the cash rich subsidiaries (Ireland?) and get money off the books.
That wouldn't be allowed, not as a means of making that money available for, e.g., paying dividends or share buybacks.

This is actual debt issued and purchased by third parties, just as Apple itself has bought a considerable amount of other parties' (e.g. other corporations', the U.S. governments') debt.
 

IJ Reilly

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Jul 16, 2002
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To say that Apple would pay "upwards" of 35% tax on repatriated earnings isn't correct. Upwards means more than. This is actually the maximum rate they could have to pay.
 
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