Apple to Fund Stock Buybacks and Dividends Through Another $5B Bond Sale

As Apple prepares to launch a new line of iPhones next week, the company is selling another round of bonds to further fund share buybacks and dividends, reports Bloomberg. Apple plans to offer $5 billion of debt in four parts to raise cash for its current capital return program.
The iPhone maker is offering $5 billion of debt in four parts, after dropping a two-year floating rate component, according to a person with knowledge of the matter. The longest portion of the sale, a 30-year security, may yield 1.1 percentage points above Treasuries, down from initial talk of around 1.25 percentage points, said the person, who asked not to be identified because the deal is private.
In August, Apple CFO Luca Maestri said Apple had completed $222.9 billion of its $300 billion capital return program, which is set to last through 2019. That figure includes $158.5 billion in share repurchases.

At the beginning of July Apple held over $261.5 billion in cash and marketable securities, but approximately 94 percent of that money is held overseas. It would cost Apple upwards of 35 percent in taxes to repatriate its overseas cash, so Apple uses debt markets to raise money more cheaply.

Apple's upcoming bond sale follows $7 billion in debt raised in a six-part bond sale in May of 2017.

Tag: bonds

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Apple Issues $1 Billion Green Bond Sale to Fund Renewable Energy

Apple today issued a $1 billion green bond to fund renewable energy generation, according to Bloomberg.


Apple reportedly said it plans to use the proceeds to finance projects involving renewable energy resources and energy efficiency, including advancing its goal of achieving a closed-loop supply chain, through which products are made using only renewable resources and recycled material.

By turning to the debt market, Apple is able to fund its sustainability initiatives without tapping into its offshore cash reserves. Those dollars would be subjected to a 35 percent corporate tax rate if they were repatriated in the United States.

U.S. President Donald Trump has reportedly proposed offering a one-time tax holiday where companies like Apple can repatriate large amounts of foreign cash at a reduced tax rate of between 10 and 15 percent. But, as of this month, the relevant corporate tax laws have yet to be reformed in the country.

Apple's bond offering comes just two weeks after Trump withdrew the United States from the Paris climate accord, an agreement signed by over 140 countries that vow to reduce greenhouse gas emissions in an effort to mitigate climate change. Apple CEO Tim Cook said Trump's decision was "wrong for our planet."

An excerpt of Cook's internal memo to Apple employees:
Climate change is real and we all share a responsibility to fight it. I want to reassure you that today's developments will have no impact on Apple's efforts to protect the environment. We power nearly all of our operations with renewable energy, which we believe is an example of something that's good for our planet and makes good business sense as well.
Apple's preliminary prospectus supplement filed with the Securities and Exchange Commission today confirms the bonds will mature in 2027. The sale was arranged by Goldman Sachs, Bank of America Merrill Lynch, and J.P. Morgan.

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Apple Raises $7 Billion in Debt Ahead of Trump’s Proposed Tax Holiday

Apple has raised $7 billion in debt in a six-part bond sale, according the company's final pricing term sheet filed with the Securities and Exchange Commission today. The fixed and floating notes mature between 2020 and 2027.

Apple said it entered 2017 with $256.8 billion in cash and marketable securities, but approximately 93 percent of that amount is held outside of the United States. Those foreign reserves would be subject to up to a 35 percent corporate tax rate if repatriated, so Apple turns to the debt markets to raise money at a cheaper cost.

Apple will use the $7 billion raised to continue funding dividend payments and share buybacks. Apple expanded its share repurchase authorization by an additional $50 billion this week, and the company says it expects to spend a total $300 billion in cash under its capital return program through March 2019.

Apple also typically puts the money towards operational expenses, repayment of earlier debt, and acquisitions of other companies.

Apple may not have to raise as much through debt markets in the future, as U.S. President Donald Trump has expressed his desire for a tax holiday that would allow domestic companies to repatriate foreign cash at a discounted tax rate. Reports have suggested the rate could be as low as 10 percent.

Interestingly, unlike many of Apple's recent bond offerings, today's sale does not include any notes with 30-year maturities. Some analysts believe Apple may be avoiding long-term bonds given the possibility of a tax holiday.

Peter Tchir of Brean Capital in a note to clients obtained by Barron's:
This is the 7th time Apple has come to market with a big slate of bonds. They started in 2013 with no debt and should be at about $100 billion by the end of today. In each of those prior deals they issued 30 year bonds - but not this time. Is it uncertainty over taxes? Talk about an ultra-bond on treasury side? Repatriation? Maybe it means nothing, but I think it is at least mildly curious that they aren't doing a new long bond here.
Apple's financial chief Luca Maestri this week acknowledged "there is a lot that still needs to happen there," in regards to the Trump administration's tax plans. "The program we're announcing today reflects the current tax legislation in this country," he said. "Obviously we will reassess our situation if things change."

The debt raised may also fund Apple's $1 billion advanced manufacturing fund announced by CEO Tim Cook earlier this week.

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Apple Raises $10 Billion in Debt Ahead of Trump’s Plans for Tax Holiday

Apple-BondsApple has raised $10 billion in debt through a nine-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 nine-part sale includes:
  • $500 million maturing in 2019 with a floating interest rate based on three month LIBOR plus 8 basis points
  • $500 million maturing in 2020 with a floating interest rate based on three month LIBOR plus 20 basis points
  • $1 billion maturing in 2022 with a floating interest rate based on three month LIBOR plus 50 basis points
  • $500 million maturing in 2019 with a fixed 1.55% interest rate
  • $1 billion maturing in 2020 with a fixed 1.9% interest rate
  • $1.5 billion maturing in 2022 with a fixed 2.5% interest rate
  • $1.75 billion maturing in 2024 with a fixed 3% interest rate
  • $2.25 billion maturing in 2027 with a fixed 3.35% interest rate
  • $1 billion maturing in 2047 with a fixed 4.25% interest rate
Apple held $246.1 billion in cash and marketable securities last quarter, but around 94% of that money is held overseas and would be subject to high U.S. taxes upon repatriation—something U.S. President Donald Trump plans to change. In the meantime, 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. Last quarter, Apple returned almost $15 billion to investors through dividends and buybacks. $201 billion of $250 billion capital return program has been completed. The company also uses the capital for general corporate purposes, such as the repayment of earlier debt and acquisitions.

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.

Tags: bonds, SEC

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Apple Raises $10 Billion in Debt Ahead of Trump’s Plans for Tax Holiday

Apple-BondsApple has raised $10 billion in debt through a nine-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 nine-part sale includes:
  • $500 million maturing in 2019 with a floating interest rate based on three month LIBOR plus 8 basis points
  • $500 million maturing in 2020 with a floating interest rate based on three month LIBOR plus 20 basis points
  • $1 billion maturing in 2022 with a floating interest rate based on three month LIBOR plus 50 basis points
  • $500 million maturing in 2019 with a fixed 1.55% interest rate
  • $1 billion maturing in 2020 with a fixed 1.9% interest rate
  • $1.5 billion maturing in 2022 with a fixed 2.5% interest rate
  • $1.75 billion maturing in 2024 with a fixed 3% interest rate
  • $2.25 billion maturing in 2027 with a fixed 3.35% interest rate
  • $1 billion maturing in 2047 with a fixed 4.25% interest rate
Apple held $246.1 billion in cash and marketable securities last quarter, but around 94% of that money is held overseas and would be subject to high U.S. taxes upon repatriation—something U.S. President Donald Trump plans to change. In the meantime, 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. Last quarter, Apple returned almost $15 billion to investors through dividends and buybacks. $201 billion of Apple's $250 billion capital return program has been completed. The company also uses the capital for general corporate purposes, such as the repayment of earlier debt and acquisitions.

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.

Tags: bonds, SEC

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