Apple-BondsConfirming rumors reported last week, Apple on Monday issued a U.S. dollar bond in Taiwan that is estimated to raise between $1 billion and $1.2 billion (via Reuters).

The yield on the 30-year bond compares with a range between 4.2 percent and 4.3 percent ahead of its pricing, according to people familiar with the matter.

That yield comes in significantly lower than recent bonds by blue-chip multinationals such as Intel and Anheuser Busch InBev, but it is only the first issue of debt by Apple on the island, which is home to a number of the company's partners in the supply chain.

The total amount raised by the bond, which is callable after the second year, has yet to be finalized, said sources who spoke to Reuters and could not be named.

Cathay Financial Holding, the parent company of Taiwan's biggest life insurer, has reportedly bought a "small part" of the bond, since the yield is lower than others issued by Apple outside of Taiwan.

Apple has a large offshore cash pile and the company clearly sees debt markets as a viable way of financing its capital return program, which was recently increased to $250 billion following a $50 billion expansion in April. Apple is also said to be issuing bonds in Australia, and possibly Japan and Singapore, as part of broader plans to raise up to $4 billion in debt in the Asia-Pacific region.

Tag: Taiwan

Top Rated Comments

billybobthornton Avatar
70 months ago
Apple is playing the world like a board game.
Score: 3 Votes (Like | Disagree)
keysofanxiety Avatar
70 months ago
Apple is playing the world like a board game.
But which board game? Risk? Power Grid? Game of Thrones? :D
Score: 2 Votes (Like | Disagree)
Col4bin Avatar
70 months ago
Whoosh. (Admittedly, that's the sound of this article flying right over my head.) Darn corporate financial stuff.
Score: 1 Votes (Like | Disagree)
RedTomato Avatar
70 months ago
MBA finance 101: companies "lever-up" to take advantage of a debt tax shield.

http://www.accountingtools.com/questions-and-answers/what-is-a-tax-shield.html
So from that I understand it to be something like this:

Apple has, for example, $10 billion in cash. They pay, for example, 10% tax on that per year. (Numbers are made up)

Apple's tax bill : $1 billion per year.

Apple then borrows $5 billion, by issuing a bond (a request to borrow money with a promise to repay.) The interest on that is, say, 20% per year. Apple has to pay out another $1 billion per year.

You may think the total for Apple to pay out is now $2 billion per year. Not so.

Most governments say if a company borrows money to pay for something, then the interest payments are a cost of running the company. So then governments (mostly) chose to allow companies to deduct (some of) that cost of running the company from (some) of the taxes they must pay the government.

Apple now deducts that $1billion in interest payment from the $1billion in taxes they owe.

Result: Apple has gone from $10 billion in cash to $15 billion in cash, and still only pays $1billion per year. ($0 in taxes, and $1 billion in interest payments).

Why is this allowed?

The benefit to government in allowing this kind of deal is that, in theory, the $5 billion raised is spent with other companies, increasing their profits and creating more jobs. The government then gets their $1billion back in taxes on the other companies' profits, plus economic stimulus, plus reduced unemployment, plus increased sales taxes, plus more revenue from the personal taxes that employed people pay. Etc.

That's the best ELI5 I can do. Am I on the right track here?
Score: 1 Votes (Like | Disagree)
DaveTheRave Avatar
70 months ago
MBA finance 101: companies "lever-up" to take advantage of a debt tax shield.

http://www.accountingtools.com/questions-and-answers/what-is-a-tax-shield.html
Score: 1 Votes (Like | Disagree)
RC Mike Avatar
70 months ago
I'm just an attorney who has forgotten a lot about corporate tax law, but...

Notice that the money raised is in USD? Apple can likely bring that money back into the US with minimal tax impact. Apple's problem is that they can't bring capital back into the US without significant taxation. So... issue debt overseas in USD. Bring the raised capital back to the US. Pay the debt with capital that's overseas that you can't easily bring home.

That the debt is callable in two years supports this idea.
Score: 1 Votes (Like | Disagree)

Related Stories

studio buds family

Beats Studio Buds Debuting Today With Active Noise Cancellation, Stemless Design, and More for $150

Monday June 14, 2021 8:00 am PDT by
We've seen a lot of teasers about the Beats Studio Buds over the past month since they first showed up in Apple's beta software updates, and today they're finally official. The Beats Studio Buds are available to order today in red, white, and black ahead of a June 24 ship date, and they're priced at $149.99. The Studio Buds are the first Beats-branded earbuds to truly compete with AirPods...
YouTube Picture in Picture Feature

YouTube Premium Subscribers Can Now Use iOS Picture-in-Picture: Here's How

Wednesday August 25, 2021 3:55 am PDT by
Google has rolled out picture-in-picture support as an "experimental" feature for YouTube premium subscribers, allowing them to watch video in a small window when the app is closed. If you're a premium YouTube subscriber looking to try out picture-in-picture, follow these steps: Launch a web browser and sign into your YouTube account at YouTube.com. Navigate to www.youtube.com/new. Scroll...
M1X MBP Feature

Leaker: Upcoming MacBook Pro to See Price Hike Over Current Model, Equal Performance Across 14 and 16-Inch Sizes

Tuesday August 24, 2021 5:28 am PDT by
The upcoming 14-inch MacBook Pro is set to be more expensive than the current 13-inch MacBook Pro and both the 14 and 16-inch models will offer the same performance, according to the leaker known as "Dylandkt." The leaker shared the information on Twitter, explaining that both of the upcoming MacBook Pro models, expected to come in 14 and 16-inch sizes, will feature the same performance due...
youtube apple tv

YouTube Discontinuing 3rd-Generation Apple TV App, AirPlay Still Available

Wednesday February 3, 2021 3:09 pm PST by
YouTube is planning to stop supporting its YouTube app on the third-generation Apple TV models, where YouTube has long been available as a channel option. A 9to5Mac reader received a message about the upcoming app discontinuation, which is set to take place in March.Starting early March, the YouTube app will no longer be available on Apple TV (3rd generation). You can still watch YouTube on...
ryanscoolios13thumbnail

Apple Releases iOS 13.1.3 With Bug Fixes for Phone, Mail, Health, and More

Tuesday October 15, 2019 10:09 am PDT by
Apple today released iOS 13.1.3 and iPadOS 13.1.3, minor updates to the iOS 13.1.2 software that was released two weeks ago. This is the fourth update to the iOS 13 operating system that came out in September. The iOS and iPadOS 13.1.3 updates are available on all eligible devices over-the-air in the Settings app. To access the updates, go to Settings > General > Software Update....
Top Stories 75 Thumbnail

Top Stories: Last-Minute iPhone 13 Rumors, Apple Announces App Store Changes, and More

Saturday September 4, 2021 6:00 am PDT by
The finish line is in sight! Apple's annual iPhone event is likely just a week or so away and all eyes will be on the company as it unveils the next version of its most popular product line. With any luck, we'll also see the next-generation Apple Watch and perhaps even some new AirPods. Other news this week saw Apple making some more changes to its App Store policies in response to a...
affinity designer contour tool

Serif Updates Affinity Photo, Designer, and Publisher With New Tools and Functions

Thursday February 4, 2021 1:58 am PST by
Serif today announced across-the-board updates for its popular suite of Affinity creative apps, including Affinity Photo, Affinity Designer, and the Apple award-winning Affinity Publisher for Mac, all of which were among the first professional creative suites to be optimized for Apple's new M1 chip. "After another year which saw record numbers of people switching to Affinity, it's exciting to...
iPhone 13 Dummy Thumbnail 2

Kuo: iPhone 13 to Feature LEO Satellite Communications to Make Calls and Texts Without Cellular Coverage

Sunday August 29, 2021 7:39 am PDT by
The iPhone 13 will feature low earth orbit (LEO) satellite communication connectivity to allow users to make calls and send messages in areas without 4G or 5G coverage, according to the reliable analyst Ming-Chi Kuo. In a note to investors, seen by MacRumors, Kuo explained that the iPhone 13 lineup will feature hardware that is able to connect to LEO satellites. If enabled with the relevant...
maxresdefault

Craig Federighi and Greg Joswiak Discuss iPadOS 15, macOS Monterey, Privacy, Shortcuts on Mac, and More

Saturday June 12, 2021 6:12 am PDT by
As is tradition, Apple executives Craig Federighi and Greg Joswiak joined Daring Fireball's John Gruber in an episode of The Talk Show to discuss several announcements that Apple made over this weeks WWDC, including iPadOS 15, macOS Monterey, and a large focus around privacy. Federighi kicks off the conversation discussing the common architecture, now thanks to Apple silicon, across all of...
iOS 14 on iPhone feature emergency

Apple Seeds Third Betas of iOS and iPadOS 14.6 to Developers [Update: Public Beta Available]

Monday May 10, 2021 10:13 am PDT by
Apple today seeded the third betas of new iOS and iPadOS 14.6 updates to developers for testing purposes, one week after seeding the second iOS and iPadOS 14.6 updates. iOS and iPadOS 14.6 can be downloaded through the Apple Developer Center or over the air after the proper profile has been installed on an iPhone or iPad. iOS and iPadOS 14.6 appear to be more minor changes focusing on...