Apple has more cash than the US govt: why is it preparing another monster bond sale?

The tech giant has $150bn sloshing around its bank account, but it wants to borrow $17bn on the bond markets.

by Emma Haslett
Last Updated: 09 May 2014

As we wrote earlier this month, if Apple were a country, it would be the richest in the world, with a $150bn (£95bn) cash pile, more than the US, UK and Germany combined.

But that’s not enough, apparently: Apple said yesterday it is planning to increase its share buyback programme from $60bn to $90bn – and to fund it, it’s going to borrow $17bn on the bond markets.  

Now, Apple has a long and glorious history with bonds. Last year it sold another $17bn, at the time the world’s largest corporate debt sale (although Verizon stole that crown in September, when it raised $49bn to help it buy Vodafone’s share of Verizon Wireless).

Demand for Apple’s last sale was over $50bn, and now it wants to make the most of its strong balance sheet and double A credit rating to do it again. And shareholders are enthusiastic, although it’s worth pointing out that those who bought into the last year’s bond sale have actually taken a slight loss.

With all that spare cash, why would Apple want to borrow? It’s simple, really: 88% of the company’s cash pile, about $130bn, is overseas. Bringing it back to the US would ‘incur tax consequences’, as Apple rather euphemistically put it, of 35%.

In fact, if you look at data by US think tank the Tax Foundation, the US has the highest corporate income tax rate of all 33 countries in the Organisation for Economic Co-operation and Development. So you can see why chief exec Tim Cook is keen to avoid repatriating it.

By the sounds of it, Cook would much rather spend that money on acquisitions. Having bought 24 new companies in the last 18 months, the company has hinted that he’s ‘on the prowl’ for more.

Shareholders, on the other hand, would rather he returned the cash to them. In January, activist investor  Carl Icahn wrote a 3,000 word (/seven page/1,285 tweet) letter to Cook urging him to increase the company’s share buyback scheme. Not surprisingly, this morning he tweeted his approval of Cook’s decision to raise aforementioned scheme to $90bn. No word on what he thinks of his methods, mind.

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