New in OS X: Get MacRumors Push Notifications on your Mac

Resubscribe Now Close

Apple Talking With Investors About $15-16 Billion Bond Offering

Tuesday April 30, 2013 7:34 am PDT by Eric Slivka
apple_apr13_bondsFollowing up on yesterday's initial filing from Apple addressing the company's efforts to issue a bond offering to raise cash in support of its stock buyback program, the company today filed a prospectus with the Securities and Exchange Commission outlining its general plans, which include six different chunks of debt with staggered maturities. The Wall Street Journal has more on Apple's prospectus and other details being revealed in one-on-one meetings with potential investors:
The Apple deal comprises six chunks of debt, according to a regulatory filing from the company. Four tranches of fixed-rate debt are being offered in the form of three-, five-, 10- and 30-year paper. Rounding out the deal are two tranches of floating-rate debt, comprised of three- and five-year notes.
The Wall Street Journal indicates that Apple has not yet announced exactly how much money it intends to raise with today's offering, but that Apple is expected to offer "more than $10 billion" worth of bonds. Reuters cites a higher figure of $15-16 billion, which would rank the deal as one of the largest investment-grade bond offerings in history.

While Apple holds approximately $145 billion in cash and investments, roughly two-thirds of that money is currently held in foreign countries and would be subject to significant taxes if it were to be returned to the United States. As a result, Apple has elected to keep that money offshore and instead rely on relatively cheap debt to fund its capital return program, which consists primarily of a major stock buyback program and a quarterly dividend. Apple's current plan involves spending $100 billion to return capital to investors by the end of 2015.

Update: Reuters reports that the order book for Apple's bond offerings has now topped $40 billion, meaning that investors have offered bids for more than twice the amount of debt Apple is expected to issue. The oversubscription gives Apple flexibility in finalizing interest rates and amounts to be raised and indicates very strong interest in Apple's offerings.

Update 2: Bloomberg reports that Apple will sell a total of $17 billion worth of bonds.
The company is offering $1 billion of three-year floating-rate notes, $1.5 billion of three-year fixed-rate notes, $2 billion of five-year floating-rate notes, $4 billion of five-year fixed-rate notes, $5.5 billion of 10-year fixed-rate notes and $3 billion of 30-year fixed-rate notes, according to market sources.
Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

[ 104 comments ]


Top Rated Comments

(View all)

Avatar
keysofanxiety
82 months ago
I don't know why, but the idea of Apple borrowing money to do this just doesn't sit right with me. That was one of the things Jobs was most proud of- no debts for the company. And let's face it, the stock buyback program is predominantly to artificially increase the stock value of AAPL -- unless there's something I'm missing (I don't profess to understand how this works, so forgive me if this comment is a bit naive!)
Rating: 16 Votes
Avatar
italynlprkn
82 months ago
Anyone saying that this is the beginning of the end, or that Jobs wouldn't have wanted it, should take a finance class.
Rating: 15 Votes
Avatar
abhishake
82 months ago
Leverage is like cocaine - makes the good times better and makes the bad times worse.
Rating: 12 Votes
Avatar
mostlydave
82 months ago
It makes me sick that one of America's most valuable companies is allowed to pull this crap instead of just paying taxes on earned income.
Rating: 12 Votes
Avatar
abhishake
82 months ago

I don't know why, but the idea of Apple borrowing money to do this just doesn't sit right with me. That was one of the things Jobs was most proud of- no debts for the company. And let's face it, the stock buyback program is predominantly to artificially increase the stock value of AAPL -- unless there's something I'm missing (I don't profess to understand how this works, so forgive me if this comment is a bit naive!)


What they're "banking" on (get it?) is the price of the stock to go up creating pretty much free money without doing anything. If the stock price drops after the stock repurchases, however, the leverage will cost them even more. This is showing how confident Apple is with AAPL.
Rating: 10 Votes
Avatar
Muscle Master
82 months ago
Why can't they support the American economy and pay.. ALL they taxes. bring the cash back to the USA
Rating: 9 Votes
Avatar
Thunderhawks
82 months ago
Bond... shaken not stirred.
Rating: 8 Votes
Avatar
Small White Car
82 months ago

And let's face it, the stock buyback program is predominantly to artificially increase the stock value of AAPL


This is your mistake. There's nothing "artificial" about the idea that restricting something increases its value.

That's a basic economic fact, not an illusion.
Rating: 8 Votes
Avatar
bbeagle
82 months ago

I don't know why, but the idea of Apple borrowing money to do this just doesn't sit right with me. That was one of the things Jobs was most proud of- no debts for the company. And let's face it, the stock buyback program is predominantly to artificially increase the stock value of AAPL -- unless there's something I'm missing (I don't profess to understand how this works, so forgive me if this comment is a bit naive!)


Apple has the billions. But they're not in the US -they're overseas. Apple, the corporation, located in the US, must use US dollars to pay the money to investors. However, to get the money back to the US, Apple would have to pay a 35% tax. It's a lot more beneficial for Apple to wait for a tax holiday where they can pay 0% or something close to that (which will come someday when a republican is in office). Apple can then get a loan for the money CHEAPER. Any interest rate below 35% is cheaper than bringing the money back.

It'd be similar if you, say, won the lottery in Canada. Keep that money in a Canadian bank, and use the money over there, don't bring it across the border into the US, and you won't have to pay US taxes on it. (Canadian taxes on lottery winnings is 0%). Get a loan for the money if you want to use it in the US, and make payments from the canadian bank on the loan.
Rating: 8 Votes
Avatar
basesloaded190
82 months ago

Why can't they support the American economy and pay.. ALL they taxes. bring the cash back to the USA


So it's Apple's job to support the American economy now?
Rating: 7 Votes

[ Read All Comments ]