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Apple Sells $14 Billion in Bonds to Take Advantage of Low Interest Rates

After years of hoarding cash, Apple has sold $14 billion in bonds to take advantage of cheap borrowing costs in order to return more cash to shareholders, according to a report by Bloomberg.

apple logo cash feature

The company issued debt in six parts. The longest portion of the offering, a 40-year security, will yield 95 basis points above Treasuries, after initially discussing between 115 and 120 basis points, according to a person with knowledge of the matter, who asked not to be identified as the details are private.

The report notes that until last year, Apple hadn't borrowed in the U.S. investment-grade market more than once in a calendar year since 2017, but low interest rates were too tempting for the company in its pursuit of aggressive share buybacks and dividends. Apple may also use it in funding for working capital, capital expenditures, acquisition and repayment of debt, according to Bloomberg's source.

Apple is believed to be sitting on $196 billion of cash, but has been working to reduce its net cash position, largely through payouts to stockholders. The company recently reported on earnings on the last quarter in which revenue topped $100 billion for the first time.

Tag: Bonds

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Top Rated Comments

azentropy Avatar
69 months ago
I'm probably in the minority, but at this stage in my life and ownership (since 1996) I'd really like to see APPL substantially increase the dividend payout. It is down to 0.60% or so now.
Score: 14 Votes (Like | Disagree)
69 months ago

Why not just buy a auto maker with that cash?
They don't need to own one. That would be a horrendously poor use of capital. It's also why smart tech companies, like Apple, don't own silicon foundries, even though they have the $$$ to do so.
Score: 13 Votes (Like | Disagree)
69 months ago

They could always knock their prices down a little, and not have so much cash in the first place.
They are. Apple's hardware margins this past quarter were only about 31%, which is lower than they've been for years (e.g., 35% - 36% in 2017). That's effectively a 10+% decline in product costs to consumers over the past 3 - 4 years. Apple makes up the margins with services, however.

Could Apple lower prices more? Yes, but they've been very consistent in their approach to profit margins. This gives the company consistency for investors and it gives Apple finances to do things (reward stock owners, develop new products and services, have a rainy day fund, etc.).
Score: 12 Votes (Like | Disagree)
69 months ago

They could always knock their prices down a little, and not have so much cash in the first place.
LMAO would you? Be real about it. If you were running a major corporation selling products that sell regardless of the higher price the last thing you're going to do is lower the price of goods. Having a boat load of cash is not a reason to do so.
Score: 5 Votes (Like | Disagree)
69 months ago

If they issue dividends or buy back shares do this out of spare cash then fine (although they should really wait for a decrease in share price to buy-back) but takinging on debt just to pay it to shareholders rather than invest in the company / R&D / make some acquisitions is nuts - even at low interest rates.
It's still cheaper than bringing the cash to the us and pay corporate tax. They can deuct the interest as expense.
Score: 5 Votes (Like | Disagree)
69 months ago
A company can fund itself in three ways broadly speaking: cash from earnings, equity or debt. It makes sense to fund yourself with the cheapest source.

They clearly think that their cash will yield higher than Treasuries + spread across all maturities, whether it's through acquisitions or some investments. Their cost of equity is in the double digits. Issuing lots extremely low yield debt is a no brainer, up to a point. They're very far away from the point where having too much debt becomes a concern of being overleveraged.

Apple's done this before and they're continuing to make smart long term money moves. In other words, their CFO is doing his job.
Score: 4 Votes (Like | Disagree)