Apple Gets Ready For Second Huge Bond Sale
Soon after Apple (NASDAQ:AAPL) announced its stronger-than-expected March quarter financial results, the Cupertino-based company also revealed that it planned to boost its share repurchase program from $60 billion to $90 billion. According to Apple vice president of finance and corporate controller Luca Maestri, this stock buyback expansion will be funded by another bond sale.
“To execute our updated capital return program in a tax efficient manner and leverage our very strong balance sheet, we intend to access the debt markets again,” stated Maestri according to a transcript of Apple’s fiscal second quarter earnings call provided by Morningstar. “We plan to be active in both the domestic and international bond markets during 2014 for an amount of term debt financing similar to what we issued in 2013, with a breakdown between markets, currencies and tenures to be determined over the course of the year, and subject to prevailing conditions in each market.”
As noted by the Financial Times, Apple’s $17 billion bond offering made last year was the world’s largest corporate debt sale at the time. While Apple ended the March quarter with a substantial cash pile of $150.6 billion, about $132 billion, or 88 percent, of that cash is held offshore. Maestri noted that “under current U.S. tax law, we would incur significant cash tax consequences” if the company repatriated its foreign cash reserves.
In this case, the phrase “significant tax consequences” may be an understatement. If Apple returned its overseas cash hoard to America’s shores, it would lose at least 35 percent of its cash in taxes under the current federal corporate tax rate.