Daily Management Review

Even With A Cash Pile Of Over $250 Billion, Apple Is Issuing A Euro-Denominated Bond


05/17/2017




Even With A Cash Pile Of Over $250 Billion, Apple Is Issuing A Euro-Denominated Bond
As Apple Inc looks to tap the strong debt markets in Europe, even as it maintains a cash pile of over $250 billion, it issued a dual-tranche euro-denominated bond on Wednesday.
 
Reuters publication International Financing Review (IFR) said that order books for the bonds have surpassed 5 billion euros.
 
The U.S. technology giant's plans but lacked any detail on numbers because the price is still being settled, a Securities and Exchange Commission (SEC) filing on Wednesday revealed.
 
Corporates have been tapping the bond markets to raise money in an environment of low interest rates in Europe and elsewhere. Since they don't have to pay as high a rate to investors, low yields are good for companies. Helping it to take supply out of the market, creating a bigger appetite for investment grade debt, the European Central Bank (ECB) has been buying corporate bonds of late.
 
The debt could be used for a variety of purposes, Apple said.
 
"We intend to use such net proceeds for general corporate purposes, including repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt," Apple said in its SEC filing.
 
"We may temporarily invest funds that are not immediately needed for these purposes in short-term investments, including cash, cash equivalents and/or marketable securities."
 
An aggressive share buyback and shareholder return drive has been the recent focus for Apple. Making it the biggest paying dividend stock in the world, Apple raised its dividend payout to $13.22 billion annually, earlier this month.
 
Analysts said that the debt could help it fund this.
 
"It's cheap debt so they can effectively take advantage of the bond markets when they have a strong capital position, strong balance sheet, and have become the biggest income player in the world with their dividend policy," Neil Campling, head of technology, media, telecom research at Northern Trust Capital Markets, said.
 
However, the idea of raising debt has been made to sound somewhat odd because Apple now has a cash pile of $256.8 billion. The catch is that an estimated 90 percent of this is sat offshore. And because of the 35 percent tax rate it would have to pay, Apple has been reluctant to bring this back to the U.S. And that is the reason that the company has been tapping bond markets.
 
Plans to issue $7 billion new bonds in the U.S. was announced last week by Apple. The company has taken on more than $98 billion in debt according to FactSet, as of the end of the first quarter of 2017. He would repatriate the cash if there was a lowering of the tax rate, Apple Chief Executive Tim Cook said.
 
Goldman Sachs, Barclays, and Deutsche Bank are the bookrunners for the bond issuance.
 
(Source:www.cnbc.com) 






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