Apple Plans $7 Billion Bond Sale for Buybacks, Dividends

(Bloomberg) -- Apple Inc. is selling bonds again after announcing a new round of stock buybacks and a 10.5 percent dividend increase for shareholders.

The iPhone-maker may sell $7 billion of debt in as many as six parts, according to a regulatory filing on Thursday. It's the company's third trip to the bond market this year, after in February selling $10 billion in the U.S. and $1 billion in Taiwan.

The longest portion of the latest sale may be a $2 billion 10-year note, a departure from its past four sales that all included 30-year bonds. In this offering, the 10-year securities may yield 0.85 percentage point above Treasuries, according to a person with knowledge of the matter, who asked not to be named because the deal is private. That's down from initial discussions of 1 percentage point to 1.05 percentage point. 

Cupertino, California-based Apple has been a fixture in the investment-grade bond market in recent years, even though it sits on a cash pile of $257 billion. Since more than 90 percent of that money is abroad and would be subject to a 35 percent repatriation tax, Apple has turned to the bond markets to fund buybacks, capital spending and debt repayments.

Holiday Coming?

The decision to forgo the 30-year maturity in Thursday's offering may mean they expect a repatriation tax holiday is coming, said Jason Shoup, a money manager and strategist at Legal & General Investment Management America.

“That's an indication that they believe they shouldn't be issuing 30-year debt if repatriation is on the horizon,” Shoup said. “They're not going to need longer-term debt if they have that cash available.”

President Donald Trump's tax plan includes a repatriation provision, though it didn't specify a rate. He proposed a 10 percent levy when campaigning, and Treasury Secretary Steve Mnuchin has said the rate would be “very competitive.”

Apple said in its earnings report Tuesday that it will spend $300 billion returning money to shareholders by the end of March 2019. It boosted its total capital return program by $50 billion, including an increase in its quarterly dividend to 63 cents a share from its current 57 cents, helping to maintain the stock price during the lulls between new products. Its share buyback program rose to $210 billion, from its previously announced $175 billion.

Goldman Sachs Group Inc., JPMorgan Chase & Co. and Wells Fargo & Co. are managing the sale, according to the filing.

Matt Brill, a money manager at Invesco Ltd., said Apple still holds appeal to investors who may have loaded up on the debt in previous sales. Mutual funds that buy investment-grade corporate debt saw inflows of $4.9 billion in the week that ended April 26, Managers with new cash to invest often park it in frequently-traded bonds like Apple's.

“When the money is coming in, you have to get it invested and Apple is a great place to start,” Brill said. “It's a high-quality liquid bond where you can put money to work and sleep at night.”

--With assistance from Katherine Greifeld

To contact the reporter on this story: Claire Boston in New York at cboston6@bloomberg.net.

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Rick Green, Andrew Dunn