UBS models $40 billion debt raise for Apple

“UBS’s Steve Milunovich today reiterates a Buy rating on shares of Apple (AAPL), and a $500 price target, after roaming through the company’s 10-Q filing, released yesterday following the company’s fiscal Q2 report on Tuesday evening,” Tiernan Ray reports for Barron’s.

“Milunovich also offers his model for Apple’s possible debt issuance, in conjunction with its doubling of the capital payout plan through 2015. He is calculating potential debt issuance at $40 billion,” Ray reports. “[Milunovich writes], ‘Assuming constant annual growth of $11.5bn in US cash, we expect the company will raise about $40bn in debt. With the proceeds, Apple should be able to keep its US cash position slightly below $20bn vs $43bn currently. All the debt might be raised this year, but we have spaced it out. At full issuance, total debt-to-LTM EBITDA of roughly $14bn would be 0.7x. We apply a conservative 2.25% coupon, a slight premium to recent IBM issuances, to calculate interest expense. The increased interest expense lowers our EPS by less than 0.5% annually over the next several years.'”

Read more in the full article here.


  1. Now that Apple has bowed down to Wall Street’s demands, the vultures are re-assessing Apple’s share price as $500 when before, they were short selling Apple stock down to $350.

    What has fundamentally changed in the core business? Nothing so far as I can see. Just some shuffling of money here and there to enrich even more of the Wall Street vultures than before.

    The moment you take your eye off the ball and focus on making the financial numbers is the moment of hubris. And Apple under Cook is fast reaching that moment.

    1. Did it ever occir to you that it also “enriches” long time Apple investors that have accumilated positions over many years that were and are stable core investors that supported and propped it up over all these years?

      They too deserve some return and compensation for their long positions, that at this point should make a significant dividend return for them.

    1. Or just maybe Tim Cook snookered Wall Street: by borrowing he keeps his cash and can pounce on acquisitions as he sees fit, all the while meeting the external pressures. Steve told Tim “Don’t worry about what I would do, do what’s right.” Maybe Tim has a better view of what is right, at this moment, with these deck chairs, than all the bloggers and analysts and commenters combined.

  2. Look at the quote from the article. “…assume a conservative 2.25% coupon…” AAPL stock is currently paying a dividend of a little over 3%. It’s cheaper for them to borrow money to buy their own stock than it is for them to leave the stock outstanding.

    That’s nuts.

    It also demonstrates that if Apple can’t win if doesn’t play the game.

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