Apple to tap a hungry debt market; strong demand likely from investors eager to get cash off sidelines

“Call it the iBond,” Katy Burne reports for The Wall Street Journal. “Apple’s announcement Tuesday that it plans to borrow for the first time could be as well received as its smartphone launches. Investors are desperate to take cash off the sidelines, even on high-quality securities that will yield relatively little.”

“Despite its huge cash stockpile, Apple plans to issue debt to help fund dividend payments and stock buybacks in part because much of its cash is overseas. Raising money in the debt market would help Apple avoid the big tax bill that would come from bringing the cash back to the U.S.,” Burne reports. “‘We are continuing to generate significant cash offshore. And repatriating this cash would result in significant tax consequences under current U.S. tax laws,’ Chief Financial Officer Peter Oppenheimer said on an earnings call Tuesday.”

Burne reports, “‘We would likely buy the deal,’ said Matt Brill, a portfolio manager overseeing $40 billion of investment-grade bondholdings at ING Investment Management. The bonds, which have received ratings of AA-plus from Standard & Poor’s and Aa1 from Moody’s Investors Service, will see strong demand because ‘it’s a first-time issuer and a very strong brand,’ Mr. Brill said… Apple said it had a cash balance of $145 billion at the end of March. The company plans to return $100 billion to shareholders by the end of 2015, doubling a commitment it made last year, after seeing its shares decline and growth rates slow. It also approved a 15% increase in its quarterly dividend.”

Read more in the full article here.

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Debt-free Apple plans to borrow to finance massive capital-return program – April 23, 2013
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Apple paid $6 billion in U.S. federal income taxes, 1/40th of all corporate income taxes collected by U.S. government in 2012 – January 5, 2013
Google, Apple, eBay shouldn’t pay taxes – people should pay taxes – November 25, 2012
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Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
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Apple: Good start; and what about the overseas cash? – March 19, 2012
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Senator John McCain eyes Apple’s $54 billion overseas cash pile – November 3, 2011
Google joins Apple in push for U.S. repatriation tax holiday – October 3, 2011
Apple lobbies Obama for tax holiday, wants to bring overseas bounty home – August 24, 2011
U.S Senate Democrat Schumer allies with Apple, other multinationals on repatriation tax talks – June 21, 2011
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  1. I told that idiot Cook to hit a line of coke but he went and hit a line of credit instead, the cretin.

    Taking on board debt is the easy part. Repaying it will be the hard part. Like coke, the first hit is always free. Then you get hooked and can’t get off.

    Cook the cretin. He will be remembered as the other cretin in the White House, the one who took on more debt, the mega-idiot, the Black Jesus.

    1. Wow, BLN, what psychotic event occurred in your recent history? You used to post some fairly decent stuff. I got tired of your ranting about 3.5″ iPhone displays, but you at least appeared to be sane. Then you started dissing Cook. Now you sound like MacFreek.

      Apple has the money *right now* to fund the entire deal through 2015, and Apple will continue to make tens of $B every year – probably another $100B+ from now through 2015. In addition, tax laws may change enabling repatriation of overseas funds with reduced tax impact. Meanwhile, Apple is going to borrow at incredibly low rates – something close to U.S. Gov’t treasuries, I would think, given Apple’s balance sheet and credit rating.

      You are making a big deal out of nothing, and you are the one who sounds like a cretin.

  2. I think it’s hilarious that Apple is opting take on debt rather than repatriate at our government’s absurd rate. Keep delaying that tax holiday, elected asshats. Companies like Apple will keep hoarding their cash piles.

    Instead of the reasonable percentage you would get from companies taking advantage of a holiday, you can suck on 100% of 0.

    1. With that much cash and interest rates so low, Apple can lock in really low rates, which are much ower than the tax rate which it would pay to bring the cash here. Paying out the interst and the dividend will not put a dent in Apple’s cash pile at all, so…it serves long term investors well in the interim, new investors well for reliable steady dividend income from a solid company and will get rid of volatility till the next Apple trick that will catch everyone with their pants down.

      Do the math, forget the fabricated wrath.

      1. I don’t disagree with anything you wrote. This financing makes sense on every level.

        My point is rather than compromise their ludicrous 35% repat rate, the government is making debt a much better deal for companies.

        1. Well then, why cut your nose to spite your face?

          It serves Apple well, it serves it’s investors well, it brings new investment motivation, it cuts the gamblers down and with that volatility, it attracts long term investors and creates a new additional value for the stock.

          The previous government, remember, emptied the coffers to bankrupt the country which now needs tax revenue to make up that deficit. Apple has to roll with the economic punches and winds…
          Apple needs to stabilize the currents and get on with it’s work and once again it is thinking creatively about it’s core investors.

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