Apple preserves overseas cash hoard, raises $6.5 billion from bond sale funding share buybacks

“Apple Inc. is showing it can keep coming back to the bond market to fund share buybacks and preserve its overseas cash hoard,” Cordell Eddings reports for Bloomberg.

“The iPhone maker sold $6.5 billion in debt Monday in a deal that was bigger than it initially intended with borrowing costs that are some of its lowest ever,” Eddings reports. “The offering included 30-year debt with a 3.45 percent coupon, or 0.3 percentage point less than the record-low yield investors demanded on Friday to own similar corporate debt with comparable maturities.”

“Apple has now raised the equivalent of $39 billion from the bond market in less than two years,” Eddings reports. “Apple has been turning to bonds instead of using cash that’s mostly held overseas, which would subject it to repatriation taxes. Apple ended December with about $178 billion in cash and marketable securities, according to a company statement on Jan. 27. Of that $157.8 billion were held by foreign subsidiaries.”

“Investors have been rewarded well for owning Apple bonds, which have returned 13.7 percent since the end of 2013, outperforming the 10.3 percent gain in debt of similarly rated companies, according to Bank of America Merrill Lynch index data,” Eddings reports. “The extra yield investors demand to own the debt has dropped 3 basis points during the same period, even as it widened 16 basis points on average for borrowings of companies with similar ratings. A basis point is 0.01 percentage point.”

Read more in the full article here.

4 Comments

  1. Interest on the debt is of course an expense for tax purposes, which in turn reduces the outlay in the U.S. for corporate income taxes: in effect the U.S. government participates in the cost. Although this is obvious, this is not mentioned in this or other articles. Dividends, on the other hand, are paid out of after tax income in the U.S. Canadians pay 15% withholding to fund Obama’s crusades against capitalism.

  2. Why not borrow 178B in US from a bank with headquarters in Europe and then pay the bank back in Europe with money abroad. That way Apple doesn’t ever have to bring back the cash…..directly?

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