Apple, looking to fund stock buybacks and dividends, is selling $7 billion of bonds even as proposed new tax laws may leave it awash in cash it previously couldn't use.
The iPhone maker said on Monday it is selling notes in as many as six parts. Apple has been the second-most active U.S. nonfinancial issuer of debt this year behind AT&T, data compiled by Bloomberg show. Kristin Huguet, a spokeswoman for Apple, didn't return messages seeking comment.
Its bond sale comes shortly after House Republicans unveiled their proposal for overhauling U.S. tax law, which would charge companies up to a 12% tax on the overseas profit they've earned, compared with the 35% they would pay if they brought that money back home now. Companies with high cash holdings overseas, typically in the tech and pharmaceutical industries, may end up with access to billions of extra dollars that they would otherwise have to keep abroad, meaning Apple could be borrowing at a time when it doesn't need more cash.
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Apple's selling notes underscores how uncertain companies and investors are about how the U.S. tax law will be changed. As of Sept. 30, Apple was sitting on $268.9 billion in cash and marketable securities, 94% of which was outside the U.S., CFO Luca Maestri said on an earnings call.
The company is constantly selling bonds to fund its share repurchases and dividends, said Noel Hebert, an analyst at Bloomberg Intelligence.
"You can't put everything on hold on the hope that tax policy comes through," Hebert said. "If you end up with tax policy that's supportive, maybe they'll come back to take down some of the debt or fund a huge dividend."
Outlook Unclear
It is still unclear how tax laws will be changed. Senator John Cornyn of Texas, the No. 2 Republican leader, said on Monday that his chamber would be starting over when it came to writing a bill, and would not use the House Republicans' proposal as a starting point. And the House Ways and Means panel began a four-day series of meetings today to consider amendments to the bill that was released last week.
Apple has "always been a very strong advocate for comprehensive corporate tax reform," Maestri told Bloomberg in a telephone interview last week. Repatriation could allow Apple to accelerate the pace of its capital return program, he said at a conference in February.
Speaking in Newport Beach, California on Monday, Treasury Secretary Steven Mnuchin said that Apple CEO "Tim Cook and many other CEOs, they're looking forward to bringing their cash back to the United States and investing it here."
The company sold $5 billion of debt two months ago to fund its capital return program just before unveiling its 10-year anniversary iPhone. That came on top of its first maple bond sale for C$2.5 billion ($1.96 billion), also for share buybacks and dividends.
"It's unusual for Apple to be so active in the debt markets in the second half of the calendar year," CreditSights analyst Jordan Chalfin said in a report Monday. "Apple is clearly not waiting on tax reform."
The longest portion of the fixed-rate unsecured bonds Apple is set to sell are $1.25 billion of 30-year securities that may yield 1 percentage point more than Treasuries, down from initial price talk of around 1.125 percentage points, according to a person with knowledge of the matter, who asked not to be identified as the details are private.
Apple is more than three-fourths of the way through a program that's returning $300 billion of capital to shareholders by the end of March 2019. It expanded that program earlier this year by $50 billion, and lengthened the time frame for it by four quarters.
Bank of America and Goldman Sachs, the lead managers on the bond sale along with JPMorgan Chase & Co., declined to comment. S&P Global Ratings gave the debt its second-highest rating of AA+.
The bond sale, at least Apple's eighth this year, comes just days after Apple briefly became the U.S.'s first $900 billion company as customer demand for the new iPhone X prompted it to predict record sales of at least $84 billion in the quarter ending in late December.
From: Bloomberg News
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