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Apple (AAPL +3.2%) is reportedly offering $17B in its bond sale, making it the largest U.S....

Apple (AAPL +3.2%) is reportedly offering $17B in its bond sale, making it the largest U.S. corporate debt deal ever. Bloomberg reports $5.5B in 10-year debt will be sold at just a 75bps premium to 10-year Treasury yields (currently at 1.68%). (previous: I, II) Update (3:47): The deal is official. Reuters: "The company is offering $1 billion of three-year floating-rate notes, $1.5 billion of three-year fixed-rate notes, $2 billion of five-year floating-rate notes, $4 billion of five-year fixed-rate notes, $5.5 billion of 10-year fixed-rate notes and $3 billion of 30-year fixed-rate notes."
Comments (28)
  • all this because of our corporate tax policy?????
    30 Apr 2013, 02:23 PM Reply Like
  • So most big cos. are gorging on cheap debt, and keeping foreign profits away from U. S. Is this a sustainable business model? The US stock market is right on the edge of major decision time, stop at a triple top, the trendline connecting peaks in 2000-07-13? Or break out on high volume to Dow 16,000? This guy has 5 charts that say "sell now" but also has a stop on a small PSQ position at QQQ 70.40 and that may well hold today thru the close. Either way, the top has to come soon, right?
    30 Apr 2013, 03:01 PM Reply Like
  • this is a variation of Einhorn's "borrow to fund" -- only difference is using tax deductible debt instruments rather than perpetual preferred stock. use of proceeds, however rather than a ratable distribution, is instead used to claw back shares at attractive prices in order to accrete share value tax efficiently for those who dont want to sell. Glad that Einhorn was a protagonist/catalyst for more thoughtful captial allocation strategy by the company.
    30 Apr 2013, 02:26 PM Reply Like
  • Skibimamex, Exactly right and succinctly stated. How refreshing.
    30 Apr 2013, 05:00 PM Reply Like
  • We called this Feb 21, 2012 (yes, a bit early). - Email us, we're happy to consult with your firm regarding optimal capital allocation policy.
    30 Apr 2013, 02:39 PM Reply Like
  • Valuable Insights - You're a clown. Nobody will be calling you.
    30 Apr 2013, 02:57 PM Reply Like
  • I might. I'll let it ring and hang up when someone answers.
    30 Apr 2013, 05:54 PM Reply Like
  • $5.5B 10year at (1.68+.75=2.43%). This means Apple can use all this amount to buy back shares and retire them saving 3% dividend.
    In addition deduct the interest as an expense saving on taxes.
    30 Apr 2013, 02:43 PM Reply Like
  • That is on the 10 year bonds. The interest rate on the 3 years is 1%. So they can borrow at 1% and retire stock that pays a 3% dividend. Its like printing money. And they can do it for over 13% of the outstanding stock at $60 billion. Finally, it adds approx $12 a share to its cash flow per share. (2% diff X $60 billion divided by 100 million shares).
    30 Apr 2013, 02:51 PM Reply Like
  • just for us dummies (or just me), where does Apple buy the stock, and how much does it pay for the stock in the buy-back?
    30 Apr 2013, 02:55 PM Reply Like
  • I would guess The open market at market price.
    30 Apr 2013, 05:56 PM Reply Like
  • 2% of Apple float is short.
    Who would short this stock in the face of a $100B return of capital?!
    30 Apr 2013, 02:57 PM Reply Like
  • Good question. I would guess the buy backs would accelerate on dips. Right?
    30 Apr 2013, 05:57 PM Reply Like
  • Not usually, because that might be considered insider manipulation
    1 May 2013, 01:56 AM Reply Like
  • repurchases of stock by issuers must be pursuant to Section 10(b)-18 limitations that limit the volume (no more than 25% of the Avearage Daily Trading Volume for past 4 weeks) that can be repurchased daily and otehr restrictions regarding purchase on "downticks" (or "upticks" I forget). Also have to be through one broker and can't buy at the open or last 10 minutes before the close. Highly prescribed so in general just buying as part of the "flow" of the market.
    1 May 2013, 11:27 AM Reply Like
  • I got a better idea, one that won't make them takeon $17 billion in debt...ok just hear me about you make more products...just a thought. Jeesh, whats with dumb management lately, they are ready to throw a $100 billion on buybacks and dividends, but are clueless how to make a better product.
    30 Apr 2013, 03:28 PM Reply Like
  • What do you think this is, Samsung? Be patient and shut up.
    30 Apr 2013, 03:41 PM Reply Like
  • The two things are not mutually exclusive. They say new products are coming and that is their history. They have the money to do this as well and they should do it. It would be better if we had a sane corporate tax policy that didn't destroy jobs through double taxation and excessive rates. However, right now Apple has to live within the existing system. They are doing the right things in the face of current environment by floating debt, buying back shares and continuing to keep foreign earnings parked offshore--all things that are in the interest of shareholders. Cook gets an "A" for getting this right.
    30 Apr 2013, 04:36 PM Reply Like
  • Let them figure it out. Good luck with that. Smoke and mirrors can only last so long. I'm withyou on your take on this.
    30 Apr 2013, 04:51 PM Reply Like
  • kingcozzi, can you please tell me which multi-billion dollar companies you personally managed and how you are qualified to determine that the management that turned a small computer maker into a company that brings in hundreds of billions of dollars is dumb?
    30 Apr 2013, 05:00 PM Reply Like
  • What are they going to use the money for? Stock buybacks?
    30 Apr 2013, 04:49 PM Reply Like
  • Will Bernanke buy the whole deal?
    30 Apr 2013, 04:50 PM Reply Like
  • Apple can do lot better with their foreign cash & I think that Apple's next step will be to invest in it's own share with it's offshore money & keep those shares on the balance sheet.
    Imagine Apple uses 60 billions of it's offshore money to buy 120 million shares at average price of 500. Those shares will not be entitled to dividend.
    Apple will save 120m * 12.2 = 1464m each year & add 1,56 to it's EPS based on 940m diluted shares count.
    The 12.2 yearly dividend represents 2.44% (on ASP of 500) & is much better than what the market offers to Apple. Besides, the outstanding shares in the market will be only 840m. This will push the price high & Apple's investments in it's own stock will appreciate considerably.
    Apple's actual offshore money makes less than 2%. This is almost dead money. Investing in it's own shares instead of other equities is much more interesting.
    30 Apr 2013, 05:41 PM Reply Like
  • They must believe their innovations exceed those of other companies that are for sale.......I would not sell my apple shares to apple....not at this price ...long. Aapl
    30 Apr 2013, 07:08 PM Reply Like
  • It is interesting to speculate which is safer, Apple's debt or the US Treasury. I suppose the only edge the Treasury has is taxation but it would appear based on history that Apple is less likely to become insolvent than the US at this rate. I think the stock plus dividends is a better buy looking ahead over the next 2 years.
    1 May 2013, 01:11 AM Reply Like
  • As long as Apple increases revenue and the stock price accelerates
    based on growth earnings then the paper chase (borrowing) to buy
    back its stock---ok ===but you still have to grow revenue.
    1 May 2013, 01:37 AM Reply Like
  • It has nothing to do with US tax law, but to do with the greed of big corporation. they want less tax and they can't get it in US. so they go abroad. Now that they complain about repatriation of earning is expensive. Of course it is expensive. Why would the law reward the evil greed of corporation?


    talking about using less than 3% tax deductible interest to buy 3% dividend share. It only makes sense if Apple can continue yield 3% dividend. The history of Apple does not offer any confidence about it.
    1 May 2013, 05:14 AM Reply Like
  • Your comment is utter nonsense. Almost all commentators agree that US corporate law is based not on efficiencies but on a "bash the rich" philosophy. Apple doesn't go abroad just to save taxes--it goes abroad because the world is a big place and people want their products all over the world. US Corporate tax policy discourages capital formation in the US. It creates incentives that make it more likely that Apple invests and manufactures abroad. That is bad policy designed to appease the envy brigade that you belong to. Hopefully, some day we'll get an administration that pursues sounder policy not based on envy.


    Corporations are not sentient human beings and therefore are incapable of "greed." Anyone who utters the phrase "greedy corporation" betrays their envy and desire to confiscate the hard earned gains of the true wealth creators because they can't create or earn anything themselves.
    1 May 2013, 12:16 PM Reply Like
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