Goldman Sachs earned $38.3 million on Apple debt deal

“Goldman Sachs Group Inc. got $38.3 million and Deutsche Bank AG $9.3 million for underwriting the largest-ever bond sale by a company, Tuesday’s $17 billion offering by Apple Inc.,” Mike Cherney reports for The Wall Street Journal.

Cherney reports, “The other banks in the deal sold smaller amounts of bonds and got smaller fees Citigroup Inc., J.P. Morgan Chase & Co. and the Merrill Lynch unit of Bank of America Corp. each took 2.5% of the deal, which means $1.3 million in fees, and Barclays and Standard Chartered each took 1.5%, putting them in line for fees of $798,750.”

Read more in the full article here.

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    1. Really? Sell your house and you pay a 4% to 6% broker fee. Sell a car at Barrett/Jackson and pay a 10% ‘seller’s fee’. The list goes on and on.

      All the banks combined earned a 0.3% fee. Compare that to a residential loan origination fee that most lenders charge: 1%.

      Don’t begrudge the amount paid until you can raise $17 Billion for your client, know how how to write the multi-page contracts, in less than a month, and do it for less.

      The actual thieves are the people you deal with every day, including the Title loan Company next to where you collect your unemployment check.


      1. Goldman-Sachs create nothing. They are parasitic thieves who leech on the real producers and extract usury…your comments seem to imply “they’re great guys cuz they loaned  all this dough and can write contracts!.” Uh, Gregg, it ain’t their dough, it’s the depositors and investors dough. Wake the fuck up, sycophant.

        1. Goldmans did not lend any of their money money – it was a Bond which is a Listed Security bought (subscribed) by Investors and other investors (even you) could be eligible to purchase those in the secondary market. It seems Goldmans did a good deal by arranging the deal in a short space and at very good margins for Apple. There are very few firms who could have done that and the fees they received were well worth the savings to Apple over the terms of the bonds. I am and have been a shareholder in apple for many years and am very satisfied with the outcome. Part of the reason is best explained by the extract from an article Motley Fool “The company’s weighted average cost of debt is 1.85%, which helps reduce its weighted average cost of capital. Beyond those gains, which are mostly implicit, Apple stands to see some very real explicit cost savings from the move. Part of Apple’s capital return program entailed boosting its quarterly dividend by 15% to $3.05 per share. That translates into $12.20 per share in annual dividend costs.”

          Apple currently trades around $440. Using debt that costs 1.85% to repurchase shares effectively means that Apple is paying $8.14 per share in interest to buy back those shares. However, retiring those shares frees the company from that $12.20 per share in annual dividend cost. It’s like Apple is paying $8 to save $12 — a good deal any way you slice it.

          It gets better. Interest expense is tax deductible, while dividend payments are not. Apple’s statutory federal income tax rate is 35% (like all American companies), so it’s after-tax interest expense in the example above really comes out to $5.29 per share. That means its total after-tax savings increases to $6.91 per share annually for every share it buys back with borrowed funds.”

          1. As a fellow share holder I’m ashamed what you say “am very satisfied with the outcome”

            Goldman may have done a good job, still 38 MILLION DOLLARS is way way too much.

  1. They all got what they wanted: Fees from Apple and fees from investors who will buy and sell and buy and sell the bonds over the coming years.

    Now that they’ve pushed Apple into doing this, expect Wall Street to start the campaign of “Apple is Doomed” all over again in order to get even more asinine acts from Apple that will line these guys (not Apple’s) pockets.

    Wall Street isn’t a “thank you” organization. It’s a “What NEW and ADDITIONAL are you going to do for me today and then tomorrow?”

    Greed knows no bounds.

    1. And expect Apple to show everyone all over again how much they don’t have a clue what it’s all about, with the best products and software interface anyone can produce – Apple ain’t no pushover organization either.

  2. Wallstreet didn’t invent the (up to) 35% tax that Apple would have to pay to repatriate its cash from foreign countries. On $17 billion, that fee would amount to an astounding fee of $5.95 billion. What did the government do to earn that? Nada. Compare that to the fees for services discussed in the article. Apple got value for money because the issue was oversubscribed and the interest rates it is paying are at all time lows. Plus, the costs are tax deductible from U.S. income.

    1. Actually, to generate $17B AFTER paying the 35% tax, you need to repatriate $26B. So the tax fee would have been more like (and even MORE astounding) $9B. NINE BILLION DOLLARS!

      Apple… smart as usual.

    2. … doesn’t “DO” anything to “earn” the taxes it collects. The government – city, state, or federal – collects the taxes so it CAN do something. Like … build roads, pay benefits to returning warriors, house criminals jailed for their crimes, and supplement your health insurance.
      My problem with Apple paying additional taxes on re-patriated monies is that they have already PAID taxes on it.

    3. I agree. As a non-US citizen I get taxed twice. First, when the profits (earned outside the US) are remitted to the USA the a second time when US levies a withholding tax of 30% on the dividends. That cannot be fair as I derive no benefit from the US Govt services on revenues earned outside the US. In addition, these arrangements are bad economics for the US and I do hope that this deal provides a catalyst to Legislators to review these arrangements. BTW I am far from being anti-US and spent 6 months hitch-hiking from East to West coast and back again after I finished Law School spending less than $300 for the entire trip – as people who picked me up were kind enough to put me up for a night or even week in some cases. Not sure I would try that now though.

  3. Cook the value destroyer lines the pockets of his pals on Wall Street. Another wanna be liberal value destroyer who sits beside Moochelle Osama bin Hussein at the Inauguration. And you thought Facebook was a crooked organisation. Apple will turn out to be a churn & burn stock now that Wall Street knows that Cook the Wuss is in thrall of it.

    1. @nut
      Thanks SO much for your insightful contribution. The use of the English language is so literary, so poetic. It illuminates like a ray of wisdom shining through crystal. I’m sure everyone, of every political stripe, has been persuaded by the devastating logic and insight.

    2. Look BLN. We all know you have it in you to say some great stuff, full of insight and intelligence.


      This kind of crap is unforgivable propaganda puke:

      “Cook the value destroyer…. Moochelle Osama bin Hussein…. Apple will turn out to be a churn & burn stock… Cook the Wuss…”

      Who are you trying to be? A human, or the dancing monkey man? Make up your mind!

      1. For starters:

        Got to use the facilitation of money that covers rewarding dividends to shareholders/customers and the share buyback program, which, otherwise, would have been subject to much higher ‘import taxes’.

        Got the street’s facilitation of issuing a popular, profitable bond offering, which ofsets that expense.

  4. For starters:

    Got to use the facilitation of money that covers rewarding dividends to shareholders/customers and the share buyback program, which, otherwise, would have been subject to much higher ‘import taxes’.

    Got the street’s facilitation of issuing a popular, profitable bond offering, which ofsets that expense.

  5. Like I said previously. Now they got their 30 basis points for the loans (maybe 3man-hours of real work).

    Next they make another 30 basis points for buying stocks (buybacks; actual work time depending how much time it takes to press th buy button). They will make another 30 basis points if they handle the sell side of the transaction.

    The loans will not even transfer physically. All in all, $51 million form th loans, $180 million buy side of the buybacks, another 180 million for the sell side. With this $400 million they will play with the commodities market to gouge all of us. At a leverage of 20 to 1, every $1 increase/decrease (short or long plays depending on who the patsy is) in WTI means a profit of of 20 percent. If WTI moves by $5 they will make a $100 percent on their profits from the apple deal.

    If apple only declared everything to be dividends, then it would have been good for the shareholders. This way only the scumbags truly benefit.

    Steve Jobs must be spinning in his grave. This will be Sculley round two.

    1. If apple really plans to borrow triple this, then the strategy must be, ok now we gave you the extortion money, we will wait and see how you push the stock price up. If it goes up, we will do thenext tranche. 30 basis points is no joke at these amounts. Overhead is fixed.

      Steve Jobs saw thru these guys. He never hired a person for that person’s MBA. The ivy leaguers hated him. Now that he is gone, watch the requirements for new hires.

      Buybacks do not help long term investors. It lines the pockets of WS. The good thing about this though, for the long traders, the price/valuation hold go up. I wonder if WS has now positioned themselves contra to their clients who they advised to go short.

            1. Weirder things have happened…

              Who woulda thunk that we’da been bankrupt like this 13years

              Apple will eventually have the funds here to pay back the loan, IMO

  6. Apple is now run to please Wall Street and help them to make money… I sold once I heard they were going to pay dividends, which was a stupid idea, and the debt deal is even dumber.. It was obviously sold by Wall Street to help them make money.

    If apple believes its sp is cheap they should engage in a share buyback.

    Steve jobs is probably rolling over in his grave.

  7. Vampires lapping at a trough of blood called DEBT.

    You can bet these vampires are the source manipulators of AAPL’s price in recent months.

    At least the debt trough will encourage the vampires to STFU and let AAPL actually reflect Apple, for a change.

  8. Seems Apple drove a hard bargain with Goldmans as spread was well below the average spread paid to raise Investment Grade paper. Hats off to Cook (who has copped too much flack) and Oppenheimer.

    “Although the primary purpose of Apple’s (NASDAQ:AAPL) $17 billion bond sale was to provide funding for its $100 billion shareholder capital return plan, the unusually large offering also had a beneficial side-effect on Apple’s underwriting partners. According to a U.S. Securities and Exchange Commission filing yesterday, Apple paid the banks that assisted in the deal a total of $53.3 million in fees. These fees are typically split among the underwriters based on the proportional amount of the sale that each firm processed.

    The main beneficiary of these fees was Goldman Sachs (NYSE:GS), which received a $38.3 million payout for handling 72 percent of the six-part bond offering. Even so, Goldman Sachs’ bonanza was only based on a 0.313 percent portion of the overall amount of funds raised. The average percent paid on investment-grade U.S. corporate bonds is 0.483 according to Bloomberg data. Apple received an Aa1 senior unsecured rating from Moody’s and a comparable AA+ rating from S&P.”

  9. I don’t understand this at all…
    First. I don’t understand what those firms are really doing in this transaction. But with that said info think they are payed way too much. I mean, 38 million dollars are an insane amount. For what? Why are Apple paying these companies this amount of money. Makes no sense to me.

    1. Karl, I am satisfied because raising cheap debt to retire equity is good for me as a shareholder and this has been explained elsewhere. Accepting that a debt issue is the way to go then question is who should do this. Apple or someone else. Apple has neither the expertise nor resources to do a deal like this they are a software/hardware firm so they need to use a firm that has these attributes. GS and Deutsche have two of the strongest franchises for doing this. As someone who works in Debt Capital markets I believe Goldmans did a great deal for Apple. 1) the issue was arranged in avery short space of time and executed faultlessly (2000 orders processed with documents in a day or so) 2) Pricing on the bonds was very tight (low) from Apple’s perspewctive and trading in the aftermarket has shown Goldmans got this spot on 3) fees Apple paid were below the average for this type of transaction

      In short arranging a deal of this size and pricing is not easy – probably a 2-3 firms could have done this but would they have got the pricing and met the timetable. The point about pricing is that others could have done it for lower fees but some of these bonds have terms of 20 and 30 years and even 5basis points more makes a huge difference in financing costs to Apple.

      Out whole way of life is based on division of labour and is conducted via intermediaries. Retailers (e.g. Walmart, Amazon, your local car dealership) produce nothing themselves but perform a useful function for us the end user. Arranging finance is just another example of using an intermediary. Do these guys do useful work? In this case yes or another case by arranging derivatives and hedging that enable individuals to get mortgages. Few would be able to buy a house if the banks were prepared to lend 20 year money agains deposits they get of similar term. Sadly, there are some commentators on this board who will take issue with this. To those who criticise the fees / deal my question is; what would you have done if you were Peter Oppenheimer.

      I agree banks have not always done “Gods” work and like many of us they are also driven by self-interest. But self interest has long and short term consequences. If you screw your customers / clients and staff in the medium term you will screw up your business.

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