The iPhone maker is tapping global debt markets for the first time in almost two decades as part of what analysts say is the most tax-efficient way of returning money to shareholders, as the company looks to appease them after they watched Apple’s shares slump by 38pc since September, reports The Telegraph.
As stock markets closed on Wall Street, Goldman Sachs and Deutsche Bank, the banks running the bond sale, had $50bn (£32bn) of orders for a sale that was expected to reach $17bn. The bonds will have maturities ranging from three to 30 years.
Although Apple has $137bn in cash, just over $100bn of it is outside America. Under US law, the Silicon Valley company would have to pay tax of up to 35pc on the money should it want to bring any of it back to give to shareholders. The bond sale, which is expected to be completed on Wednesday, offers the company a cheaper way of handing cash back to investors.
Tim Cook, who has been Apple’s chief executive since taking over from co-founder Steve Jobs in 2011, last week bowed to shareholder pressure and more than doubled to $100bn the amount it will give back. Its existing $10bn share buyback programme was increased to $60bn, while the dividend was lifted 15pc.
Apple’s decision to sell bonds for the first time since 1996 comes as fund managers scramble for ways to boost returns against a backdrop of record low interest rates. With a blitz of quantitative easing also driving down yields on government bonds, investors’ appetite for the extra yield offered by the debt of highly-rated companies has increased. The average yield on investment grade debt fell to 2.45pc on Tuesday, according to the Bank of America Merrill Lynch Global Index, down from 3.37pc a year earlier.
“Everybody will want Apple bonds in their portfolio. There is a huge demand for yielding assets,” said Suki Mann, a strategist at Societe Generale. “Companies can borrow at the lowest-ever funding costs.”
Should Apple sell $17bn in debt it will rank as the largest dollar bond sale in history, eclipsing a 2009 sale by Swiss pharmaceutical company Roche.
Although Apple shares have gained 9pc since the company announced its plan to return more cash, Mr Cook remains under pressure to return the iPad maker to the pace of sales growth that last year saw it oust ExxonMobil as the world’s most valuable company.
Apple shares were up 0.3pc at $441 in late afternoon trading on Wall Street.