Apple Makes Preparations for its First Debt Sale


Here we go: the only tech giant without debt will begin investor calls on Monday to hold one of the most anticipated bond sales of the year, Reuters reports. After announcing amazing quarterly sales, Apple also said it had increased the company’s program to return capital to shareholders, with plans to utilize $100 billion in cash under the expanded program.

Analysts estimate that Apple has $145 billion in cash, but only $45 billion in the US, which won’t cover the full buy-back program. As a result, Apple will need to issue up to $20 billion of debt over the next three years.

Looking at Apple’s rating, that picture looks different from the perspective of S&P and Moody. S&P awarded a rating of AA+ for Apple, while Moody rated it Aa1.
While some analysts welcome the borrowing strategy — just like investors — some say that borrowing money for a company that has $145 billion in cash seems odd. But that $100 billion in overseas cash means that if Apple tries to bring it back to the US, it would be taxed at the top corporate tax rate of 35%. And this doesn’t sound good at all.

So, with interest rates near record lows, the cost of issuing debt is cheaper than the corporate tax. And if the analysts are right, Apple could raise funds at a cheaper rate then the triple-A-rated Microsoft.