Apple Said to Plan First Euro Bond Offering: Corporate Finance
2014-11-04 00:46:27.646 GMT
(To be sent this column, click SALT CF. For credit-market
news, click on TOP CM.)
By Sridhar Natarajan, Katie Linsell and Adam Satariano
Nov. 4 (Bloomberg) -- Apple Inc. is gearing up for its
first bond offering in euros as the iPhone maker seeks to fund
another round of shareholder rewards without using overseas cash
that would be subject to U.S. repatriation taxes.
The world’s most valuable technology company has hired
Goldman Sachs Group Inc. and Deutsche Bank AG to manage the sale
and the money would be used for share buybacks and dividends,
said a person with direct knowledge of the matter. Banks have
started gauging investor interest in the offering, according to
investors at two firms who have been approached.
By borrowing in euros, Cupertino, California-based Apple
can take advantage of a market that’s offering the lowest yields
in six years relative to dollar-denominated debt. Apple, which
has the biggest corporate cash hoard at $155 billion, has raised
$29 billion from bond sales since 2013 to give back cash to its
owners instead of repatriating its overseas reserve.
“All-in funding levels in euros are so low for corporates
at the moment it makes sense to issue here,” said Jens
Vanbrabant, the lead money manager at London-based ECM Asset
Management Ltd., which oversees $8 billion. “It’s much lower
than dollars. There is no doubt investors will like the name.”
Stock Buybacks
A London-based spokesman for Apple declined to comment on
whether the securities would be denominated in euros.
Apple, which holds more than 88 percent of its cash
overseas, according to data compiled by Bloomberg, has been
pushed by activist investor Carl Icahn to accelerate its stock
repurchase program.
The company sold $12 billion of bonds in April after
issuing $17 billion in 2013 in the largest corporate bond sale
at the time, data compiled by Bloomberg show.
Its $2.5 billion of 3.45 percent notes sold this year have
gained 2.9 percent, index data compiled by Bloomberg show. The
securities coming due in May 2024 traded at 102.9 cents on the
dollar yesterday to yield 3.1 percent, according to Trace, the
bond-price reporting system of the Financial Industry Regulatory
Authority.
The average yield that investors demand to hold investment-
grade corporate bonds in euros fell to 1.22 percent, or 0.02
percentage point from a record low, according to Bank of America
Merrill Lynch index data. That’s widened the yield gap with
dollar notes to 1.87 percentage points, which is close to the
biggest discount since October 2008, the data show.
Cash Holdings
The company is forecasting a record holiday sales quarter
after introducing new bigger-screen iPhones and slimmer iPads.
Apple’s cash accounted for 10 percent of the $1.65 trillion
held by U.S. non-financial companies through the first half of
the year, according to an Oct. 20 report by Moody’s Investors
Service.
Under current law, U.S. companies can defer federal income
taxes on most overseas earnings indefinitely. When they do bring
back the money to the U.S., they’re taxed at the corporate rate
of 35 percent, with credits for foreign income taxes paid.
Companies paying little in overseas levies face higher U.S. tax
bills upon repatriation and can save money by borrowing instead.
Billionaire Icahn wrote an open letter last month to Apple
Chief Executive Officer Tim Cook to increase share repurchases
and boost the value of the stock, which he said was trading at
half its value.
‘Great Rates’
“They’ve got so much cash, and generate so much cash, that
they can incrementally increase shareholding funding activity
and they will still be fine,” Lon Erickson, a Santa Fe, New
Mexico-based money manager at Thornburg Investment Management
Inc., said in a telephone interview.
The company, which had authorized a $90 billion share
buyback program, has repurchased $67.9 billion of shares as of
Sept. 27, according to a regulatory filing last week. Apple also
increased its quarterly dividend to 47 cents earlier this year,
resulting in a capital returns program that has increased to
$130 billion, according to the filing.
“They will probably be able to lock in great rates but
investors need to be wary that they could reach a point when
credit spreads start to leak wider, especially if interest rates
start to rise,” Erickson said.
For Related News and Information:
Apple Sees Another IPhone-Fueled Record for Holiday Sales
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Apple Sells $12 Billion of Bonds to Preserve Overseas Cash Hoard
NSN N4TALW6VDKI0<GO>
Apple Raises $17 Billion in Largest Corporate Bond Sale Ever
NSN MM38BH6VDKHS<GO>
--With assistance from Hannah Benjamin in London and Katherine
Chiglinsky in New York.
To contact the reporters on this story:
Adam Satariano in San Francisco at +1-415-617-7204 or
asatariano1@bloomberg.net;
Sridhar Natarajan in New York at +1-212-617-0624 or
snatarajan15@bloomberg.net;
Katie Linsell in Madrid at +34-91-700-9631 or
klinsell@bloomberg.net
To contact the editors responsible for this story:
Shelley Smith at +44-20-3525-2020 or
ssmith118@bloomberg.net
John Parry, Faris Khan
2014-11-04 00:46:27.646 GMT
(To be sent this column, click SALT CF. For credit-market
news, click on TOP CM.)
By Sridhar Natarajan, Katie Linsell and Adam Satariano
Nov. 4 (Bloomberg) -- Apple Inc. is gearing up for its
first bond offering in euros as the iPhone maker seeks to fund
another round of shareholder rewards without using overseas cash
that would be subject to U.S. repatriation taxes.
The world’s most valuable technology company has hired
Goldman Sachs Group Inc. and Deutsche Bank AG to manage the sale
and the money would be used for share buybacks and dividends,
said a person with direct knowledge of the matter. Banks have
started gauging investor interest in the offering, according to
investors at two firms who have been approached.
By borrowing in euros, Cupertino, California-based Apple
can take advantage of a market that’s offering the lowest yields
in six years relative to dollar-denominated debt. Apple, which
has the biggest corporate cash hoard at $155 billion, has raised
$29 billion from bond sales since 2013 to give back cash to its
owners instead of repatriating its overseas reserve.
“All-in funding levels in euros are so low for corporates
at the moment it makes sense to issue here,” said Jens
Vanbrabant, the lead money manager at London-based ECM Asset
Management Ltd., which oversees $8 billion. “It’s much lower
than dollars. There is no doubt investors will like the name.”
Stock Buybacks
A London-based spokesman for Apple declined to comment on
whether the securities would be denominated in euros.
Apple, which holds more than 88 percent of its cash
overseas, according to data compiled by Bloomberg, has been
pushed by activist investor Carl Icahn to accelerate its stock
repurchase program.
The company sold $12 billion of bonds in April after
issuing $17 billion in 2013 in the largest corporate bond sale
at the time, data compiled by Bloomberg show.
Its $2.5 billion of 3.45 percent notes sold this year have
gained 2.9 percent, index data compiled by Bloomberg show. The
securities coming due in May 2024 traded at 102.9 cents on the
dollar yesterday to yield 3.1 percent, according to Trace, the
bond-price reporting system of the Financial Industry Regulatory
Authority.
The average yield that investors demand to hold investment-
grade corporate bonds in euros fell to 1.22 percent, or 0.02
percentage point from a record low, according to Bank of America
Merrill Lynch index data. That’s widened the yield gap with
dollar notes to 1.87 percentage points, which is close to the
biggest discount since October 2008, the data show.
Cash Holdings
The company is forecasting a record holiday sales quarter
after introducing new bigger-screen iPhones and slimmer iPads.
Apple’s cash accounted for 10 percent of the $1.65 trillion
held by U.S. non-financial companies through the first half of
the year, according to an Oct. 20 report by Moody’s Investors
Service.
Under current law, U.S. companies can defer federal income
taxes on most overseas earnings indefinitely. When they do bring
back the money to the U.S., they’re taxed at the corporate rate
of 35 percent, with credits for foreign income taxes paid.
Companies paying little in overseas levies face higher U.S. tax
bills upon repatriation and can save money by borrowing instead.
Billionaire Icahn wrote an open letter last month to Apple
Chief Executive Officer Tim Cook to increase share repurchases
and boost the value of the stock, which he said was trading at
half its value.
‘Great Rates’
“They’ve got so much cash, and generate so much cash, that
they can incrementally increase shareholding funding activity
and they will still be fine,” Lon Erickson, a Santa Fe, New
Mexico-based money manager at Thornburg Investment Management
Inc., said in a telephone interview.
The company, which had authorized a $90 billion share
buyback program, has repurchased $67.9 billion of shares as of
Sept. 27, according to a regulatory filing last week. Apple also
increased its quarterly dividend to 47 cents earlier this year,
resulting in a capital returns program that has increased to
$130 billion, according to the filing.
“They will probably be able to lock in great rates but
investors need to be wary that they could reach a point when
credit spreads start to leak wider, especially if interest rates
start to rise,” Erickson said.
For Related News and Information:
Apple Sees Another IPhone-Fueled Record for Holiday Sales
NSN NDSR2H6VDKHW<GO>
Apple Sells $12 Billion of Bonds to Preserve Overseas Cash Hoard
NSN N4TALW6VDKI0<GO>
Apple Raises $17 Billion in Largest Corporate Bond Sale Ever
NSN MM38BH6VDKHS<GO>
--With assistance from Hannah Benjamin in London and Katherine
Chiglinsky in New York.
To contact the reporters on this story:
Adam Satariano in San Francisco at +1-415-617-7204 or
asatariano1@bloomberg.net;
Sridhar Natarajan in New York at +1-212-617-0624 or
snatarajan15@bloomberg.net;
Katie Linsell in Madrid at +34-91-700-9631 or
klinsell@bloomberg.net
To contact the editors responsible for this story:
Shelley Smith at +44-20-3525-2020 or
ssmith118@bloomberg.net
John Parry, Faris Khan