Apple Reportedly Planning for Investor Call Today Ahead of New Bond Sale

Monday November 3, 2014 3:45 am PST by Richard Padilla
stockbuyback Apple is planning to hold an investor call today ahead of a potential bond sale, reports The Wall Street Journal. A banker working on the deal says that Apple may begin issuing bonds in Euros, as Deutsche Bank AG and Goldman Sachs Group are said to be arranging the call.
Deutsche Bank and Goldman Sachs Inc. are arranging a call for the firm with investors Monday, and a deal, possibly at least partly in euros, could come as soon as this week, according to a person familiar with the matter. The iPhone maker has never issued debt in currencies other than the dollar before.
Apple last entered the bond market in April with a $12 billion sale, which followed last year's $17 billion sale. The order book for Apple's bond offerings in April 2013 topped $40 billion, as investors oversubscribed and offered bids for more than twice the amount of debt issued. Apple's bond offerings are a part of its expanded capital return program, which centers around a major stock buyback program and a quarterly dividend. Apple has pledged to return more than $130 billion to shareholders by the end of 2015.

Tag: wsj.com
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dnlklr
68 months ago
Interest rates on corporate bonds are historically extremely low right now.

So issuing debt now allows them to finance things like the capital return program and dividends more cheaply than using their foreign cash pile (the bulk of their savings) and bearing US tax losses when they repatriate those earnings .

tldr: Interest rate % for bonds are lower than tax rate % on cash

makes sense...
Rating: 17 Votes
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keysofanxiety
68 months ago

Interest rates on corporate bonds are historically extremely low right now.

So issuing debt now allows them to finance things like the capital return program and dividends more cheaply than using their foreign cash pile (the bulk of their savings) and bearing US tax losses when they repatriate those earnings .

tldr: Interest rate % for bonds are lower than tax rate % on cash

makes sense...


Cheers dude, I didn't really understand the article but you explained it really well.
Rating: 6 Votes
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aaronvan
68 months ago
Apple. San Francisco. Bonds. Barry Bonds. :eek:
Rating: 2 Votes
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Michaelgtrusa
68 months ago
The private Federal Reserve is the issue.
Rating: 2 Votes
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hydr
68 months ago

I don't understand why they're selling bonds when they have so much cash in the bank :confused:


Tax purposes. They got a lot of offshore cash. Giving it back to investors will add additional taxes for bringing it back to the US first. Alternatively, they can sell bonds and pay interest with offshore cash. And pay dividends to shareholders.
Rating: 2 Votes
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Satori
68 months ago

I don't understand why they're selling bonds when they have so much cash in the bank :confused:


I think that quite a lot of their cash reserves are held overseas and they would have to pay a lot of tax to bring it into the US.
Rating: 2 Votes
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maflynn
68 months ago
I don't understand why they're selling bonds when they have so much cash in the bank :confused:
Rating: 2 Votes
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manu chao
68 months ago

Interest rates on corporate bonds are historically extremely low right now.

So issuing debt now allows them to finance things like the capital return program and dividends more cheaply than using their foreign cash pile (the bulk of their savings) and bearing US tax losses when they repatriate those earnings .

tldr: Interest rate % for bonds are lower than tax rate % on cash

You pay a tax once for a given amount of income, you pay interest every year. This whole thing only makes sense if they can eventually repatriate their earnings at a lower tax rate than they have and if the difference between that potential future lower tax rate and the current tax rate is larger than the accumulated interest paid until this moment.
Rating: 1 Votes
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aaarrrgggh
68 months ago
Currency Hedge

Aside from the tax benefits, this would seem like a currency hedge to limit risk in dollar terms. Declining Euro liky hit Apple last quarter. What they raise in bonds directly eliminates currency exposure.
Rating: 1 Votes
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bflowers
68 months ago
I'm grateful for all the explanations, especially the link to the Forbes article. I was really at a loss for why they would be selling bonds but it makes perfect sense now. Thanks.

Our tax system is really screwed up. We tax every dollar multiple times. When a company earns it, when they use it to pay employees and again when we spend it. We even get taxed on Federal tax refunds! Fun stuff.
Rating: 1 Votes

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