“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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