Apple has embarked on one of the biggest bond offerings in history as part of a ploy to avoid tax.
Cupertino will soon begin issuing bonds in what will be one of the biggest debt sales of all time, it announced today. The plan is part of a scheme to funnel cash back to investors over the next three years.
After its stock price fell to dismal lows of sub-$400 last week, Apple promised to return up to $100bn to shareholders by starting up a share-buyback programme and paying out increased dividends.
Reports have suggested the total size of the bond issue could soar up to $16bn, which has never been matched by any other non-bank bond sale in America.
The move is surprising because Cupertino has no debt and is currently riding high on cash reserves thought to be worth around $145bn.
However, as an estimated $100bn of these reserves is locked up overseas, Apple would have to pay 35 per cent tax to repatriate it. It is cheaper for Cupertino to borrow the cash from the markets and pay interest on it, than to repatriate its cash from overseas and pay the resultant swingeing taxes.
The bonds will be issued through Goldman Sachs as well as Deutsche Bank and demand is likely to be very high.
"The market is going to be all over it," said Todd Duvick, corporate credit analyst at Stifel Nicolaus. "It's a name that everyone follows and they're comfortable with. From a credit perspective it's going to be a good diversification name for a lot of accounts."
Bonds will mature in either 2016 and 2018 for the floating rate notes, or 2016, 2018, 2023 and 2043 for the fixed rate notes.
Read Apple’s announcement here. ®