Even though Apple is still displaying billions of dollars on its current balance sheet, it has been revealed that the company is searching for ways to tap into the debt market for the seventh time in the same year. Apple wants to raise $5 billion through selling a bond with several maturities that would split into several tenors starting from two-year, five-year, ten-year, and 30-year notes. The rates and the total sizes of the latest debt are yet to be revealed.
Apple has tapped the US debt markets severally this year. For instance, in February, the company raised $10 billion from selling the bonds. Also, in May, it introduced a multi-billion dollar issue which split across several tranches. The company is currently the third-largest dividend payer in the US and has overseen major share buyback projects amounting to $16.5 billion. In such cases, Apple prefers to sell bonds at low rates than repatriate the foreign cash which incurs hefty corporate taxes.
The company started selling bonds in 2013 and its borrowing reached $100 billion marks in the third quarter of this year. Since Apple generates huge amounts of cash that it can sustain its business and pay its shareholders and bondholders both now and in the future, the move is not bad for the company. Its investors are also not worried about the trend since the borrowed cash is used to pay dividends and buying back the stock sustainability.
Currently, Apple’s cash without the debt stands at over $153 billion though this may change if the debt profile continues to lose momentum in the near future. Apple possesses the most cash in the foreign countries and according to Moody Investor Service, the company owns about $230 billion cash piles overseas but due to the heavy corporate tax rate subjected to this cash, Apple has repeatedly tapped into the debt market to reward its massive shareholders rather than repatriate its cash from overseas. Ever since Apple started borrowing from the bond markets, its debt has drastically grown from zero to over $96.6 billion by July 1, this year.