Apple takes on more debt to fund expanded capital-return program

“Apple Inc. is back in the bond market,” Mike Cherney reports for The Wall Street Journal. “The company is looking to complete an $8 billion bond sale on Wednesday. One investor said the deal received about $20 billion in orders from buyers, allowing the company to sell more than the roughly $6.5 billion that investors initially expected.”

“The company says it will use the proceeds to help pay for share buybacks and dividends, part of an expanded capital-return program for shareholders the company announced last month,” Cherney reports. “Apple is offering the bonds in seven parts, with maturities ranging from two to 30 years.”

“A 10-year bond from Apple is being offered to yield 1.00 percentage point more than comparable Treasurys, while a 30-year bond is being offered to yield 1.40 percentage points more than Treasurys,” Cherney reports. “Some outstanding Apple bonds traded slightly lower in price, and higher in yield, on Wednesday morning, as some investors sold in anticipation of the new deal.”

Read more in the full article here.

“Apple keeps piling up the debt – and investors keep running,” Matt Krantz reports for USA Today. “Shares of Apple are down 66 cents, or 0.5%, to $125.14. That means investors have seen $53.2 billion in market value evaporate since the shares hit their all-time high just a few weeks ago.”

“Apple’s infatuation with debt is getting interesting,” Krantz reports. “Apple has gone from having no debt as recently as early 2013 – to being loaded with more than $40 billion of it.”

Read more in the full article here.

MacDailyNews Take: Free money.


  1. “Infatuation”? This entire situation has been thrashed and trashed in the press a dozen times already. We know what the debt is for. We know how it’s far cheaper for Apple to sell this debt than to bring their foreign made profits home to the USA through the outrageously bloated USA taxation system.

    IOW: The ‘infatuation’ is within the USA congressional system maintaining a dire tax barrier to bringing home foreign made profits. That rate is theoretically somewhere around 34%. Apple, and many other companies, get around that barrier by selling debt with their foreign funds.

    So Matt Krantz who reports of USA Today: Go rant at Senator Carl Levin and his ilk about this nonsense. #MyStupidGovernment at work.

    1. I would rather Apple pay to its stockholders 80% of the profits made each quarter it makes a profit. I believe any publicly held company should pay to it’s stockholders 80% of the companies profits, at least. If Apple is paying 1.5%, 52 cents a share, then 3%, would be a $1.04, 6% would be $2.08, 12% would be $4.16, 24% would be $8.32. We are into numbers that above what Apple says it makes per share… So, who, in their right mind would want to sell shares in a company that would be producing those kinds of numbers per quarter. So would that drive up the stock price? 80 + million dollars in salary, almost a 10th of a billion dollars, and just started to work at the company! No, send me my 80% of profits per share, pay the taxes, stop incurring debt to pay me. Imagine if you had a 1000 shares, and Apple paid out 80% of the profit per quarter, what would you be willing to sell your shares for?

      1. Uh, really? 80% eh? Are you perhaps Ferengi? In any case, you’re way off in the weeds/ Apple’s not paying you a cent of its foreign profits until such time as they’re brought into the USA into Apple’s USA coffers. That ain’t happening without selling debt by the method described here.

        Back to your point: I suspect I speak for most of us here by saying that we’d rather Apple invested in R&D and buying relevant third party technology than potentially bleed itself off to financial gaming leaches. Then there’s the bizarro psychology going on at Wall Street regarding Apple. Apparently, Apple is good a company compared to most of the dreck on Wall Street to treat it with sane respect. Instead, AAPL is the plaything of those who cannot comprehend why Apple is so record breakingly successful compared to said dreck on Wall Street. Now, if Apple turned into another customer abusing, hyping blowhard that sells piles of stock and can’t make a profit, along the lines of say Amazon, then of course they’d be Wall Street darlings. IOW: Wall Street currently acts significantly insane.

  2. Agreed, Derek. Matt Krantz is a moron.

    Now cue the low information folks, both on and off this forum, who will bemoan Apple’s “debt” because, from lives in their mothers’ basements, they have no idea that this is a pretty smooth move on Apple’s part.

  3. Taking on debt for stock buybacks is corporate lunacy.

    It won’t solve the off-shore cash taxation problem, and it creates risk in the event of rising interest rates.

    Not to mention, all equities are currently overvalued by historical valuations.

    Pay it out in dividends, invest in capex or R&D, or save it for a rainy day.

    1. @Gary Why is this “corporate lunacy”? Apple was issuing debt (I don’t know about this current offering) that had interest rates that were below what the firm was paying in dividends. So from a financial point of view it made a lot of sense. If you need to be explained to here is how it works. Issue $100 of debt at 1.10% interest rates. Take that $100 received and buy back the stock that was paying a dividend rate of 1.70%. Thus lower Apples outlays by 60 basis points.
      As for “risk in the event of rising interest rates”. How so? The interest rates on most of the debt, except for some short term bonds were fixed. So fluctuations in interest rates will not materially affect them.
      “All equities are currently overvalued by historical valuations” How does this even come into play? Apple’s valuation is not high by historical valuations.
      You need to go back to investing 101 and learn about how to invest. Because your comments are so flawed.

  4. I think we all understand the savings benefit for taking out debt that is cheaper to pay than the dividend return on the retired shares.
    However the fact remains that the debt has to be paid off at some point. So you do need to factor in that cost too. Hopefully there will be a tax holiday and Apple will be able to repatriate their overseas cash and will probably set aside some to cover the payment when the debt matures.
    So I see the debt as a necessary evil that Apple has to do but I see it as a potential long term risk.

    1. Cook has chosen to take his purebred award-winning company to bed it with flea-ridden Wall Street. Debt is NEVER cheaper, it just looks good on paper when you ignore the risk that you take on. Apple is going to wake up with fleas and will regret the unnecessary debt.

      If Apple truly was prioritizing the delight of its customers, then it wouldn’t be prostituting itself to please WS greed. It would take its money and reinvest it in Apple to improve its products & services, bring more manufacturing under its direct control (better protecting IP and demonstrating sustainable practices) and to significantly improve its worldwide retail operations.

      But no, Cook is blowing Apple’s bankroll on debt to Wall Street and to overpaid & clueless fashion executives.

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