Apple to Raise Up to $12 Billion in Debt to Fund Capital Return Program

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Apple has filed a preliminary prospectus supplement with the U.S. Securities and Exchange Commission as it prepares to issue a $10-$12 billion bond sale, reports CNBC. The debt raised will fund Apple's capital return program, including continued stock buybacks and dividend payments to shareholders, and general corporate purposes such as the repayment of debt and acquisitions.

Apple will be offering floating rates that mature in 2018 and 2019, in addition to fixed rates that mature between 2018 and 2046. Apple's proposed 30-year bond due in 2046 may yield 2.15 percentage points more than similar-maturity Treasuries, according to Bloomberg. Apple is also planning to issue seven-year green bonds, typically used for clean energy and other sustainable initiatives, the report claims.

Apple's capital return program currently runs through March 2017, as announced last year. The company has returned $153 billion in capital to investors of its $200 billion currently authorized, so the iPhone maker will almost certainly need to raise debt through this bond sale in order to continue stock buybacks and dividend payments before setting a new authorized amount as soon as April.

Apple held $215.7 billion in cash and marketable securities, partially offset by $53.2 billion in long-term debt, as of the first fiscal quarter of 2016, but a significant portion of that money is held overseas and would be subject to high U.S. taxes upon repatriation. By raising debt through bonds, Apple can pay for its U.S. operations at a much lower rate, especially given its Aa1/AA+ bond credit rating.

Update: Apple has filed a final pricing term sheet with the U.S. SEC confirming its nine-part $12 billion bond sale.

Article Link: Apple to Raise Up to $12 Billion in Debt to Fund Capital Return Program
 

MrAverigeUser

macrumors 6502a
May 20, 2015
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336
europe
a desperate try to stabilize the shares in a rather money-burning action…. instead of caring about customers needs… or care about the horrible working conditions in China...
They will not prevent the market to sell… they give investors just more time to sell for higher prices. Perhaps the apple management wants to stabilize also their own shares until the day they are allowed to sell them themselves?
The sellers will be very pleased…. china´s poor and slaved working class will not…nor apple´s customers
 

dBeats

macrumors 6502a
Jun 21, 2011
636
214
a desperate try to stabilize the shares in a rather money-burning action…. instead of caring about customers needs… or care about the horrible working conditions in China...
Apple is at the top of the list of the most active companies assuring worker conditions and rights. Most companies who do work in China are low profile enough that they don't even need to make a report. Why single out Apple? What about any other electronics manufacturer, consumer electronics, home appliance, clothing, children's toys, steel manufacturing, etc. The problem isn't Apple, it's China. China's elite would rather pump their egos up on the death of their own people's children then ever consider real laws and guidelines for worker safety. So seriously stop the BS. Apple is literally doing everything it can, which can not be said for some others whose products you are probably wearing or looking at or touching at this very moment.
 

ghost187

macrumors 6502a
Mar 18, 2010
954
2,000
What a dumb way to spend that money. If Cook is so worried about the share prices, he can hire more people to fix software bugs, put more GBs of storage and ram in all of its hardware, add a couple millimeters to substantially increase battery life of all of its hardware, and I'm sure more people will buy Apple goods and share prices will naturally increase as well. They can buy companies like Adobe and Nintendo for what they spend on buybacks yearly. I buy Apple products, but I know they are far from perfect and Android and Windows just plain suck, so I don't have much of a choice. Watching where the profits go is a bit disturbing to be honest.
 

Night Spring

macrumors G5
Jul 17, 2008
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5,850
Wait, but how does Apple pay off this debt without bringing back the overseas money at some point in time?
 

kidaje

macrumors regular
Mar 6, 2012
141
239
Imagine if Apple didn't do buybacks and dividend payments. They would have between $300-$400 billions in cash and securities... Kinda crazy
 
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CTHarrryH

macrumors 68020
Jul 4, 2012
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And then no one would buy or keep their stock which would have all sorts of other implications. I love comments from people who have no idea how capital markets work or what if valued and what isn't.
 
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kidaje

macrumors regular
Mar 6, 2012
141
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And then no one would buy or keep their stock which would have all sorts of other implications. I love comments from people who have no idea how capital markets work or what if valued and what isn't.
I guess i would be the same people who buy's google stock or?
 

firewood

macrumors 604
Jul 29, 2003
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Looks like upper mgmt needs to try to boost the stock price to meet their yearly bonus targets....
Also to keep happy all those old retired people whose diversified savings and investment funds holds some AAPL stock, which they may need to live off of in the future if/when social security goes bankrupt.
 
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Chupa Chupa

macrumors G5
Jul 16, 2002
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a desperate try to stabilize the shares in a rather money-burning action…. instead of caring about customers needs… or care about the horrible working conditions in China...
Nope. Apple does this regularly to pay its quarterly dividend. Most of Apple's $ is overseas and this is less expensive than xfering cash back to the U.S.

I have issues with the increasing downward quality of Apple s/w and lack of exciting products but this is sound Corp. cash management.

Also keep in mind it's these buybacks that give Apple the ability to offer key employees stock options in order to retain them as employees long term
 

Rocketman

macrumors 603
This is just the dollar currency issue. Based on past experience you can expect a euro issue and possibly two other currencies as well. The total raise could be 2-3x this sum. With the stock near recent lows it is smart to get liquidity. The capital cost averages 3% and the yield on the stock being bought back is 2.2%. Not quite pays for itself on a cash flow basis. They should actually use offshore funds to buy stock on margin and when repatriation is allowed, send the shares not cash.

Rocketman

Here's what a green bond means:

http://www.latvenergo.lv/eng/invest...as-implements-placement-of-7-year-green-bonds

placement disclosure said:
The main requirement for green bonds is the use of the funds raised in the issuance process only for projects relevant to green thinking and related to renewable energy sources, improved energy efficiency and sustainable environment. The funds raised will be channelled to green-minded projects financed or part-financed by Latvenergo Group that concern generation as well as distribution and transmission network assets in accordance with Latvenergo AS Green Bond Framework, whereby the Center for International Climate and Environmental Research - Oslo, a Norwegian independent institute for interdisciplinary climate research, has issued a second-party opinion regarding the suitability of the notes as an investment in connection with certain environmental and sustainability criteria. The Center for International Climate and Environmental Research - Oslo has assigned to the Latvenergo AS Green Bond Framework the Dark Green shading, which is the highest possible assessment in the field of environment.
This firm is government owned. :D
 
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MrAverigeUser

macrumors 6502a
May 20, 2015
740
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Nope. Apple does this regularly to pay its quarterly dividend. Most of Apple's $ is overseas and this is less expensive than xfering cash back to the U.S.

I have issues with the increasing downward quality of Apple s/w and lack of exciting products but this is sound Corp. cash management.

Also keep in mind it's these buybacks that give Apple the ability to offer key employees stock options in order to retain them as employees long term
This is just the dollar currency issue. Based on past experience you can expect a euro issue and possibly two other currencies as well. The total raise could be 2-3x this sum. With the stock near recent lows it is smart to get liquidity. The capital cost averages 3% and the yield on the stock being bought back is 2.2%. Not quite pays for itself on a cash flow basis. They should actually use offshore funds to buy stock on margin and when repatriation is allowed, send the shares not cash.

Rocketman

ok this sounds very logic, might be the reason indeed… but I am still not 100% sure about it…
could nevertheless be a sort of (at least added) window-dressing ...
 

Bubba Satori

Suspended
Feb 15, 2008
4,726
3,753
B'ham
They bought shares at $140.
They bought shares at $110.
They bought shares at $95

Four observations.
1. Great example of dollar cost averaging. If the stock goes up to $200 they're geniuses.
2. Think of all the hardware and software they could have upgraded and/or fixed with all that money.
3. Never try to catch a falling knife. It looks like they're failing terribly at propping the stock price up.
4. Tim, Eddy and Jony need to be sacked.
 

Jakexb

macrumors 6502a
Mar 18, 2014
779
1,078
What a dumb way to spend that money. If Cook is so worried about the share prices, he can hire more people to fix software bugs, put more GBs of storage and ram in all of its hardware, add a couple millimeters to substantially increase battery life of all of its hardware, and I'm sure more people will buy Apple goods and share prices will naturally increase as well. They can buy companies like Adobe and Nintendo for what they spend on buybacks yearly. I buy Apple products, but I know they are far from perfect and Android and Windows just plain suck, so I don't have much of a choice. Watching where the profits go is a bit disturbing to be honest.
Not really. If you look into why, ultimately, that stocks have value, it's because eventually it is expected that they will pay dividends or will be repurchased by the company. This is the underpinning that makes stocks something more than just the Greater Fool Theory.
 
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ghost187

macrumors 6502a
Mar 18, 2010
954
2,000
Not really. If you look into why, ultimately, that stocks have value, it's because eventually it is expected that they will pay dividends or will be repurchased by the company. This is the underpinning that makes stocks something more than just the Greater Fool Theory.
Honestly, I'd be very happy if Apple went private like Dell did recently, but I somehow doubt it can happen with a company of Apple's size.

Why do I care? Because most of the problems people complain about are caused by Tim Cook being a miser, and he does it to please Wall Street.
 

firewood

macrumors 604
Jul 29, 2003
7,837
1,089
Silicon Valley
Not really. If you look into why, ultimately, that stocks have value, it's because eventually it is expected that they will pay dividends or will be repurchased by the company.
Or be purchased in a take-over or merger. But is there currently any fund or investor big enough to take over Apple?
 

akm3

macrumors 68020
Nov 15, 2007
2,252
279
Wait, but how does Apple pay off this debt without bringing back the overseas money at some point in time?
Because the cost of borrowing money is SO LOW right now, money that they buy to do share buybacks means they don't have to pay shareholder dividends on the shares they buy back. Because they don't have to pay dividends, it actually saves them money vs. not borrowing the money. As an added bonus, the interest payment is also tax deductible. Every dollar they can borrow this cheap to not pay future dividends = more money for them.
 
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abetancort

macrumors newbie
Oct 6, 2013
24
5
TheCanaries
Wait, but how does Apple pay off this debt without bringing back the overseas money at some point in time?
Simply, because its Noth American operations generate so much free cashflow before financing activities that with it is expected, factoring a conservative revenue growth rate and significant decline in its gross margin, for the region, that it will be more than able to cover (apply multiplier here) the total service of debt (until maturity) from all the indebtedness it has taken for the dividend payout and stock repurchasing program.
[doublepost=1455679456][/doublepost]
What a dumb way to spend that money. If Cook is so worried about the share prices, he can hire more people to fix software bugs, put more GBs of storage and ram in all of its hardware, add a couple millimeters to substantially increase battery life of all of its hardware, and I'm sure more people will buy Apple goods and share prices will naturally increase as well. They can buy companies like Adobe and Nintendo for what they spend on buybacks yearly. I buy Apple products, but I know they are far from perfect and Android and Windows just plain suck, so I don't have much of a choice. Watching where the profits go is a bit disturbing to be honest.
It is not an ad-hoc plan to increase the share price, because the market before the repurchases had taken place would have already discounted their effects, they are open and well known, so the actual repurchase doesn't have a direct effect on its stock price. The plan for dividends and stock repurchases and the commitment to execute it was publicly layed out (in quantities and dates) by Apple a few years ago, it was announced by Tim Cook due mainly to the pressure of institutional investors (fund managers); Steve Jobs would probably have told all of them to go to hell and "****" themselves. But Tim them was a newly appointed CEO.
[doublepost=1455681069][/doublepost]
Looks like upper mgmt needs to try to boost the stock price to meet their yearly bonus targets....
Their bonuses are not directly tied to the stock performance, but the company fundamentals: delta revenues, delta gross margin absolute and %, delta EBITDA absolute and %, delta net margin absolute %, delta net income before taxes absolute and % by product segment, line, product, market, distribution channel, etc...

The only relationship stock prices has to do with remuneration is by means of its effects in the call options vesting this year but given normally at least three years ago as part of the bonuses of the year given. If the options are out of the money during the period from vesting to expiration (usually not very long) they are simply worth 0 but the person receiving them would in most cases have paid taxes on then because when granted they usually are in the money (taxes have to be pay on the difference between the spot price of the stock and the lower strike price of the option even if the option can not be executed until vested 3 plus years later). If now are worth 0, he put up usually a lot money up front for nothing.
 
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