Apple has filed a preliminary prospectus supplement with the U.S. Securities and Exchange Commission as it prepares to issue a $10-$12 billion bond sale, reports CNBC. The debt raised will fund Apple's capital return program, including continued stock buybacks and dividend payments to shareholders, and general corporate purposes such as the repayment of debt and acquisitions.
Apple will be offering floating rates that mature in 2018 and 2019, in addition to fixed rates that mature between 2018 and 2046. Apple's proposed 30-year bond due in 2046 may yield 2.15 percentage points more than similar-maturity Treasuries, according to Bloomberg. Apple is also planning to issue seven-year green bonds, typically used for clean energy and other sustainable initiatives, the report claims.
Apple's capital return program currently runs through March 2017, as announced last year. The company has returned $153 billion in capital to investors of its $200 billion currently authorized, so the iPhone maker will almost certainly need to raise debt through this bond sale in order to continue stock buybacks and dividend payments before setting a new authorized amount as soon as April.
Apple held $215.7 billion in cash and marketable securities, partially offset by $53.2 billion in long-term debt, as of the first fiscal quarter of 2016, 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, especially given its Aa1/AA+ bond credit rating.
Update: Apple has filed a final pricing term sheet with the U.S. SEC confirming its nine-part $12 billion bond sale.





















Top Rated Comments
They bought shares at $110.
They bought shares at $95
Four observations.
1. Great example of dollar cost averaging. If the stock goes up to $200 they're geniuses.
2. Think of all the hardware and software they could have upgraded and/or fixed with all that money.
3. Never try to catch a falling knife. It looks like they're failing terribly at propping the stock price up.
4. Tim, Eddy and Jony need to be sacked.
If the you think the euro will go crazy as you seem to suggest, I would suggest to start buying tangible commodities with intrinsic value like Gold, Uranium, Silver and short the dollar too because both will tumble together (the dollar and the euro are already so intertwined that a shakedown at one will directly affect negatively the other).
On the other hand if you think the cash holding of Apple are denominated in mostly in euro because they are "outside" the US, you are wrong.
You may have never heard of Euro-Dollar (also known as Petro-Dollar) Denominated Accounts, these are accounts nominally outside of the US, which hold dollars that actually are accounts of International Banks, think HSBC in their own US Subsidiary or in any other mayor US Bank. Those US dollars are from their overseas clients, the money goes through the Fed as any other US dollar, and it's invested in t-bills, treasuries, government bonds, corporate bonds or any other financial assets denominated in US Dollars but its regulatory and tax treatment is completely different from a resident in the US because for most of the deals the tax and regulatory jurisdiction is the one that of the bank where the client has the euro-dollar account and not the US.
Apple will probably have euro-denominated accounts in well diversified basked of currencies covering the most important one in which it does business, including the Chinese Yuan, as they are natural hedges against world currencies exchange rate fluctuations.
The purchase of shares by offshore subsidiaries will surely be construed (due to financial consolidation) by the IRS as form of repatriation of earnings subject to taxation in the US, as it's the company through wholly owned foreign subsidiary who is actually repurchasing the shares. Financially assisting the parent company to proceed with the repurchases. Moreover if those shares had to be amortized due to SEC regulations (it does not matter it the shares are held by the parent or any controlled subsidiary for the purposes of the SEC are under control of the Company) the subsidiary would have clearly give funds in exchange for nothing.
Understand that's one of the reasons why Apple does not sets a credit facility from its subsidiaries to borrow money to pay for dividends or stock repurchases, when it consolidates its financial statements there would be no debt (you can not owe to your self, it's an oxymoron).
When you factor the 27% in taxes for every dollar the would have to pay if they didn't borrow, this far more than offset in the order of a few magnitudes the current yield they'll pay their bonds vs using their own cash at 0% (I already simplified the formula on both sides of the comparison with different sign is the return they can get in their onw free cash so you can take it out from both).
The current yield on the AAPL stock is irrelevant since the repurchase plan was made long ago, it's what is called a sunk cost (or if you prefer a given since the past cannot be changed).
But for the sake of it, neither Apple, nor any sane company board -besides not being allowed by the SEC- should ever buy its own stock on margin by depleting its cash reserves. if its stock falls it will have to put up more collateral that it doesn't readily have, the market will smell it is in a cash crunch and investors will start fleeing dumping its stock, as a result the price will fall more and it will have to come up with even more collateral for the margin account and soon everyone will be unloading its stock at any price and what just happened is like getting in a stall and keeping pulling up the nose of the plane so nobody notices, nothing more than the perfect recipe for an uncontrolled accelerated stall that will spin the company out of control and hopefully only into bankruptcy.
On the other hand, a company certainly can't buy all stock it wants from its shares outstanding, nobody can do it because after purchasing over certain threshold it has to present a tender offer to the company and its shareholders for 100% of the outstanding shares.