Counterparties: Apple’s superlative borrowing

April 30, 2013

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Apple has a long list of superlatives to its name; this week, it added two more titles to the roster. It’s now the world’s biggest dividend payer, and also the company behind the largest investment-grade corporate-bond offering of all time. Today’s $17 billion in bonds, which attracted an order book of $50 billion, constitute Apple’s first debt issuance since 1994; the company ended up raising more money than even the Facebook IPO did.

All of the proceeds will end up in the pockets of shareholders: Apple plans to return $100 billion in total by the end of 2015, through stock buybacks and bigger dividends. That makes the offering the latest act in Apple’s recent history of legal tax avoidance. Over two-thirds of the company’s $145 billion cash pile is located overseas, and borrowing money, rather than repatriating overseas cash, will help Apple avoid a tax hit of up to $35 billion.

Apple issued six different bonds in total; the pricing was aggressive, with the new three-year bonds coming at a yield of 0.51%, just 20bp over Treasuries, and the 30-year bonds pricing 100bp over, at 3.88%. That’s in line with the triple-A yields commanded by Microsoft; Apple is rated one notch lower, at AA+.

Apple’s decision to tap the debt markets is emblematic of the continued surge in corporate bond sales this year (a “bond bacchanalia,” as Bloomberg put it). Companies are taking advantage of historically low interest rates — Matthew Yglesias points out that Apple is borrowing at a negative real yield — and an excess demand for safe assets. So far this year, they’ve borrowed $1.39 trillion: that’s almost $17 billion per day. – Peter Rudegeair

On to today’s links:

Home prices jump 9.3% over last year — and a whopping 23% in Phoenix – S&P/Case-Shiller

How retirement fees cost you, a scrolling explainer – Frontline

JC Penney’s disastrous ex-CEO was paid 1,795 times the average department store worker – Bloomberg

New Normal
There’s an “epidemic of joblessness” among the world’s young – The Economist
Chart: The Insane levels of youth unemployment in Europe – Joe Weisenthal

EU Mess
Unemployment in Europe hit a record high in March – BBC
Eurozone unemployment in eight charts – Quartz

The studies behind austerity are weak. The study behind “uncertainty” is worse – Ezra Klein
Americans don’t care as much about inequality as academics would like – Real Clear Markets
Does income inequality lead to political inequality? – Bruce Bartlett

Google just launched its own payment card (in Kenya) – Quartz

Fred Wilson regrets how his company managed – A VC

David Petraeus may be looking to rebuild his image by joining a private equity firm – Valleywag

So Hot Right Now
Chickpea farming is booming thanks to America’s growing appetite for hummus – WSJ

Hedge funds are leading the push to privatize Fannie and Freddie – Bloomberg

And, of course, there are many more links at Counterparties.



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AAPL has largely avoided taxation on its substantial earnings. This move however allows the payment of a much larger dividend which will send Billions to the US Treasury via the investors who receive the dividend and pay the just raised dividend tax.

AAPL could spend/invest/squander the money any number of ways. They could buy a chip company like Qualcom or Nivida. They could buy spectrum rights, or an entire cellphone company like sprint or even Vodafone. They could buy up content producers like CBS, Sony, Viacom.

Instead they are choosing to let their investors choose how to allocate that capital. In making that choice rather than reinvest all their profits like Berkshire AAPL is allowing more of the profit they generate to be taxed.

By paying

Posted by y2kurtus | Report as abusive

This is a great move by Apple. I think they are going to slowly but surely lose their marketing appeal and innovation edge. This is one way to not only keep people happy when they think about your company, but keep the mainstream media talking about you as well.

Posted by UICJim | Report as abusive