Apple will issue debt for the first time in 17 years
Apple has communicated to the SEC its intention to issue billions in bonds, something that the apple company had not done for at least 17 years. In the statement sent to the SEC, Apple does not specify the exact amount of debt it plans to issue, but, according to ‘The Wall Street Journal’, bond managers estimate that the figure will exceed 10,000 million dollars (7,603 million euros) .
The company will carry out six debt issues with maturities in 2016, 2018, 2023 and 2043, four at a fixed rate and two at a variable rate, in an operation that includes Goldman Sach and Deutsche Bank. Likewise, it informs that it will use the net income obtained with this issuance for “general business purposes”, which includes the share repurchase plan and the payment of dividends collected in its recently expanded program to return capital to shareholders.
On April 23, the tech giant announced its intention to increase its current share repurchase program from 10,000 million dollars (7,603 million euros) to 60,000 million dollars (45,623 million euros) and raise the dividend by third quarter cash 15%.
According to CNN Money
This issue would be the first in 17 years, since the last time the company informed the SEC of its intention to issue debt was in 1996, when it intended to sell convertible bonds. However, it is not clear if this operation was finally carried out. The issuance of Apple’s debt is made in order to be able to pay the shareholders the announced remuneration package (dividend plus share repurchase) without having to take the cash that they have expatriated to the US and therefore pay for the corporate tax differential . Standard & Poors has already announced that Apple’s debt will have an AA + rating, the same as that of the US sovereign debt.
With interest rates on land
We enter the paradox that is cheaper for a company like Apple to borrow than repatriate its cash and pay the corporate tax differential. These are the figures of the Apple bond issue that seems to have already closed today. It is the largest bond placement of a company in history, placing 17,000 million dollars, exceeding 16,500 million placed by Roche in 2009. The offer to buy the bonds has exceeded 50 billion dollars, almost 3 times the demand.
Bonds have been placed at various maturities. To get an idea of the required interest, we have that the 10-year Apple Bonus will rent 2.42% (the Spanish ten-year bond was today at 4.14%) and the 30-year Apple bond has been placed at 4.03%