Per a prospectus filed on Wednesday, it was revealed that tech giant Apple is planning to borrow in the bond market for the first time in almost two years. The company hadn’t done it since November 2017.
This marks the first time that the creator of the iPhone, the iPad and other widely famous items has borrowed through the bond market since the United States tax reform took place, letting Apple repatriate considerable funds (hundreds of billions of dollars) in overseas cash at a lower tax rate. That, as a result, helped the firm return money to its shareholders.
General Corporate Purposes
The company has stated that its objective with the proceeds from the bonds is for general corporate purposes. Among them are share buybacks, dividends payment, funding for working capital, acquisitions, and more, per the prospectus.
At the moment, borrowing is cheap and convenient. With a low yield of 1.47 percent via 10-year Treasurys, Apple’s bonds may become enticing for those investors searching for higher yields. The tech company wants to raise four or five billion dollars, per Dow Jones. Stock brokers’ customers are taking notice of all these developments.
Apple’s current financial report shows $210.6 billion on cash and marketable securities, per information provided by the company in July. However, that is 26 percent lower than the peak it achieved in the first quarter of 2018, at $285.1 billion.
With almost $211 billion on hand, a bond offering may look counterintuitive. However, it remains a rather easy way for Apple to raise funds.
The company already has more than enough cash, but the present circumstances presented it a prime opportunity to borrow thanks to the low rates. Apple has said that it wants to hold equal parts debt and cash eventually.
Nearly $100 Billion in Total Term Debt
The famous phone and tech devices manufacturer also has nearly $100 billion ($98.3 billion, to be precise) in total term debt as of the end of the second quarter, per information found on the prospectus.
The company also announced an increase of its share buyback scheme by $75 billion in April and increased its quarterly dividend in 5 percent.
Apple has stated in the past that it is shooting for a net-cash neutral position. As it turns out, the global enterprise is, in addition, investing in the United States of America, and that includes a projected $1 billion campus in Texas’ capital city, Austin.