iBonds: Apple plans six-part U.S. dollar bond offering

Apple Inc. has opened books on a six-part bond offering. The currency will be in U.S. dollars. The Cupertino Colossus plans to offer three-year and five-year fixed and floating-rate notes, reports say. Apple will also offer 10-year and 30-year fixed-rated notes through Goldman Sachs and Deutsche Bank.

Apple bonds are expected to be in high demand among investors.

Pricing remains unknown, but reports say terms may be revealed later today.

“The company intends to issue debt that includes floating- rate notes maturing in 2016 and 2018 and fixed-rate securities due in 2016, 2018, 2023 and 2043, Apple said today in a regulatory filing,” Charles Mead reports for Bloomberg News. “Proceeds may help Cupertino, California-based Apple avoid so-called repatriation taxes on its $102.3 billion of funds held overseas as it returns an additional $55 billion to shareholders through 2015 to compensate for a stock that’s been hammered by signs of slowing growth.”

Mead reports, “Apple last issued new debt in 1996, Bloomberg data show.”

Read more in the full article here.

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Apple’s massive $100 billion capital return program is a perfect tax arbitrage – April 26, 2013
Apple to tap a hungry debt market; strong demand likely from investors eager to get cash off sidelines – April 25, 2013
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
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Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
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U.S. companies push for tax break on foreign cash – June 20, 2011
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  1. Brilliant idea that Apple has bigger cash after releasing bond as the interest Apple pays is less than the dividend paying to the repurchased AAPL share .

      1. … to owe anyone money. Owing money COSTS money and Apple is currently earning more than they are spending – thus the pile o cash they have accrued.
        Having even MORE money sitting in a vault somewhere is no great advantage. Perhaps the issue is how much of their pile is overseas and cannot be repatriated without incurring a (nother) tax expense.

    1. Looks like Apple may have found a loophole to bring their profits into the US tax-free.

      If Apple now has to pay back these bonds that they issued to pay for the dividends, then won’t they be able to write down these payments from all their books overseas, thereby whittling down their offshore cash reserves w/o tax penalty?

      Anyone in corporate accounting here can confirm this is what they are REALLY doing?

  2. Although I don’t like the idea of Apple taking on debt, the mere fact that they will save some if not all of the interest on reduced tax payments is key. They still have to pay off the principal…
    Another way of looking at this is that the the money that was due to be paid for taxes will now go to the bond holders. Something about that makes me uneasy especially considering the national debt.
    I for one like the idea of allowing cash repatriation by taxing the foreign income only on the rate difference from the original country and the US. Therefore this would not be double taxation in the strictest term but bring it in line with what they would have paid if earned in the US.

  3. Years from now this will not be viewed as a wise move. Apple has transformed from a company obsessed with making great products into a company obsessed with share price and income tax evasion.

    Instead of handing out dividends and borrowing money to hand out more, Apple should be investing the money into growing the company and R&D.

    Steve Jobs many times rebutted suggestions concerning dividends by saying it was his job to make investors rich by raising the stock price. What we are seeing is the pissing away of a hard won cash reserve by clueless bozos obsessed with the financial pages instead of making great products and services for the world.

    1. I don’t agree with you, DE, but that’s fine. You stated your objections to Apple’s actions and provided your rationale in a reasonable manner.

      What you fail to address is what you would do with Apple’s cash and securities hoard of $145B and growing. You can’t possibly spend all of it on R&D unless you are financing a mission to Mars. Besides, Apple will still likely have well in excess of $100B at the end of 2015, even after paying out the increased dividends and buying back $60B in stock (which is value returned to the shareholders by dividing up the company into fewer parts, thus higher earnings per share).

      1. Not saying this is what Apple should do , but offer this as an example.

        Apple could easily build a FIOS type network over the bulk of the United States (by population- not geography) and still have tens of billions left over. How valuable would it be to bypass the Cable and Telephone cartels and offer almost everyone a fiber to the premises option?

        Stock Buybacks and Debt to evade taxation are Wall Street tricks- not exactly what built Apple in the first place.

      2. What I would do with $145 billion dollars is buy radio spectrum and start cellular services all over the world. That would let Apple offer a secure, trouble free experience for their devices and dominate all competitors. That would be better than to go into bonds where bond values have nowhere to go but down if interest rates spike world wide, as when investors dump treasuries because investors finally see that Uncle Sam has too much debt. Only banksters who control presidents as puppets win in financial games, while Apple will end up as a rube with empty pockets like the rest of us.

    2. @Darwin I’m sorry I disagree with your statement. The company has not become ‘obsessed’ with share price and income tax evasion. Do you expect Apple to just pay whatever taxes a country says it should while other global companies try to move money offshore? No, you expect them to save and keep as much money as they can. As for share price. If Apple was obsessed with keeping their share price high, why did they let it drop from $700 to as low as $390 in 6 months? They were virtually silent while the stock was being pummeled.

      The only way Apple could fend off the day traders, short sellers, hedge fund managers, and Wall Street was to pay out dividends and a buy back program. Remember, they initiated the dividend/buyback when the stock was doing quite well. They had to increase the dividend/buyback to basically tell all those that beat down the stock that enough is enough. You want to drive our stock down? Well guess what, we have more money than you do, so we’re going to buy back our stock and retire them.

      Oh yeah and then we’re going to introduce new products in the fall and you guys are going to all jump right back on, so get ready for a ride.

      Apple set the floor and they’re going to raise the ceiling. I almost fell for all the negative articles (traps) and sold some of my shares at $400 right before earnings. In the end, I believe in the company and their future. I held on and nicely rewarded all the way to $444.

      1. … “off-shore” was earned “off-shore”. Taxes were paid on those earnings in the countries they were earned in.
        The problem is the US would expect their own cut of any monies repatriated. In essence, Apple can’t freely spend those monies except in the countries they were earned in!
        @DE … they have paid taxes, not “evaded” them. The US would like them to pay more. Not a surprise, given that they need the money to pay for the debt incurred by the previous administration and they cannot raise taxes back to Reagan-era levels because of Tea Party obstructionism.

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