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Apple has raised $7 billion in debt through a five-part bond sale of both fixed and floating rate notes, according to the company's final pricing term sheet filed with the U.S. Securities and Exchange Commission on Friday.
The five-part sale includes:
- $350 million maturing in 2019 with a floating interest rate based on three month LIBOR plus 14 basis points
- $1.15 billion maturing in 2019 with a fixed 1.1% interest rate
- $1.25 billion maturing in 2021 with a fixed 1.55% interest rate
- $2.25 billion maturing in 2026 with a fixed 2.45% interest rate
- $2 billion maturing in 2046 with a fixed 3.85% interest rate
The transaction was underwritten by Goldman Sachs, J.P. Morgan Securities, MLPF&S, and Deutsche Bank Securities, among others.
Apple held $231.5 billion in cash and marketable securities, partially offset by $68.9 billion in long-term debt, as of the fiscal third quarter, but a significant portion of that money is held overseas and would be subject to high U.S. taxes upon repatriation. By raising debt through bonds, Apple can pay for its U.S. operations at a much lower rate, particularly given its low-risk Aa1/AA+ bond credit rating.
Apple typically uses the capital raised to fund dividend payments to shareholders and its share buyback program, which the company expanded to $175 billion in April. At the time, Apple said it expects to spend over $250 billion in cash under its capital return program by the end of March 2018. It also uses the capital for general corporate purposes, such as the repayment of earlier debt and acquisitions.
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Anyway, that's enough politico-economic discussion from me today.
The complainers want to bring it back for the purpose of taxing it. The current capital gains tax here is 23.8%. The income tax around 45% including state and federal, and "Obamacare" add-ons. They want more tax, not more investment. Where it is now, it is providing more investment with minimal taxation. In order to use it in the USA where they want they have been taking out massive loans, about $70B against those assets in various currencies, to invest the loan proceeds in the USA which is legal without taxation. The cost of course is the massive interest they pay on an absolute basis, if not a relative basis. That is a cost.
The good news from all this is Apple has learned to bypass wacky US Federal tax laws to be able to invest MORE in the USA than they otherwise could.
New balance: $75.9B
About 1/6 short term, 1/6 5 year, 1/3 10 year and 1/3 30 year overall. So it will roll off over the next several years to a notable degree. The return on average assets is currently 10.24%, so the payment is fully covered by growth.
Time for more GBP bonds.
2019 and 2021 seem like safe guesses that Apple won't vanish before then. 2026 doesn't seem unreasonable... although 10 years is a long time in tech. 2046? That gives us enough time that a company that hasn't even formed yet somehow undoes Apple.
By 2046, the singularity may have occurred already.