Apple Preps Bond Sale for Stock Buyback Initiative

stockbuybackAhead of last week's earnings release, Apple announced that it would more than double its capital return program from $45 billion to $100 billion, with a 15 percent increase in dividend payments and a massive stock buyback initiative.

To facilitate the expanded capital return program, which will amount to a share repurchase of $60 billion, Apple must take on debt, a process that the company initiated today. According to Reuters, Apple has begun investor calls, led by both Deutsche Bank and Goldman Sachs, and it has filed the necessary SEC paperwork for a debt offering.

The only major tech company without a penny of debt on its books, Apple stunned the markets last week by announcing it could sell debt for the first time to help fund a $100 billion capital return program for shareholders.

Any bond offer from the makers of the iconic iPhone and iPad would be highly sought after by investors, and it is believed the company could raise funds at a cheaper rate than even Triple A rated Microsoft.

Apple has a long history with both Deutsche Bank and Goldman Sachs. According to Bloomberg, the former advised Apple on its takeover of Next Computer, while the latter has been advising Apple on a cash plan. It is unknown if one of the two banks will lead the upcoming bond offering.

Though Apple has a cash pile that exceeds $145 billion, only a portion of that is available in the United States, leaving the company unable to fully fund its stock buyback. Borrowing money will allow Apple to avoid the taxes that it would incur moving money from overseas.

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Top Rated Comments

jdechko Avatar
153 months ago
Sorry, but the amount of stupidity here is baffling.

1) Smart people borrow money all the time when it suits them financially Borrowing money at 2% and holding investments at 3% is better than cashing in bonds at 3% and having no debt (or borrowing at 2% and having to pay 15% in taxes). Peter Oppenheimer, CFO > Internet Armchair Accountants on MR

2) Apple is buying back stock slowly. They can't afford to completely go private, but you can bet that's where they are headed. As long as they are a public company, they are still dependent on some outside entity (stockholders). And given the current state of affairs, a bank loan is much less volatile than Apple's share price.

3) Tim Cook is the business genius to Steve's marketing/product genius. Tim Cook is the reason why Apple has $145bn in the bank. Cook is the reason why the Steve could announce the iPad at $499 instead of $999. Cook definitely isn't a product guy, no doubt. But he is a master at operations. (This is the reason why Steve Jobs recommended Cook as his successor).

Firing Tim Cook would be a huge disaster for Apple (see #3). It's what a vocal minority of the stockholders are calling for (see #2), which is why it won't happen.
Score: 6 Votes (Like | Disagree)
50548 Avatar
153 months ago
As an Apple shareholder, I am intrigued and I'm not completely convinced by this.

The moment you start taking on debt is the moment you lose your independence.

What makes this move even more moronic is the basic fact that Apple, of all companies, is the ONLY one with zero debt and zero need to borrow money.

Of course, the usual "investors" looking for a cheap buck will praise this move as the main enabler of fat dividends and artificially-higher stock prices.

Remember when SJ used to tell us how Apple had no debts whatsoever? Where is he when we need him?

Tim Cook = Michael Spindler Redux.
Score: 6 Votes (Like | Disagree)
Chupa Chupa Avatar
153 months ago
As an Apple shareholder, I am intrigued and I'm not completely convinced by this.
Convinced of what? The buyback or the borrowing to pay for it?

At any rate this is a tip of the hat to mutual, hedge, and pension fund managers who want to see some $ if they are to keep positions in AAPL.
Score: 6 Votes (Like | Disagree)
camnchar Avatar
153 months ago
Apple should just create an overseas bank and loan the money to itself.
Score: 4 Votes (Like | Disagree)
oneMadRssn Avatar
153 months ago
"..more than double its capital return program from $55 billion to $100 billion.."

Hmmm..?

haha. Math fail.
Score: 4 Votes (Like | Disagree)
SmoMo Avatar
153 months ago
"..more than double its capital return program from $55 billion to $100 billion.."

Hmmm..?
Score: 4 Votes (Like | Disagree)