On Tuesday, Apple announced its intention to issue 10 tranches of US-investment grade corporate bonds, estimated to be worth somewhere in the region of $12bn. The bonds are expected to sell with both fixed and floating interest rates, and sell well in a time when many investors are clinging to cash for fear of getting caught up in the market tumult.
The timing of the bond issue is slightly unusual in that it jars with Apple’s $215bn in cash reserves. What’s more, the company last month reported another record quarterly profit ($18.4bn) in spite of what remains a difficult macroeconomic situation. That being said, the purpose of the issuance is not to raise cash per se, but to return money to shareholders without having to repatriate any of the company’s overseas holdings, so as not to incur a higher tax charge in the US.
Schemes such as this capitalise on low tax jurisdictions and reduce the tax bill
The move is likely to attract the ire of critics, who say schemes such as this hand multinationals like Apple an unfair advantage over SMEs in that they capitalise on low tax jurisdictions and reduce the tax bill. The criticism will be all the worse given Apple is subject to a European Commission investigation for its use of Irish tax shelters.
However, few can blame Apple for choosing to sell now, given interest rates are all but non-existent and investors are cash rich. The company’s bond issue was the largest of several conducted by big businesses on Tuesday after a particularly dry spell for the market: IBM, Toyota Motor, Comcast and BNY Mellon all announced deals of their own on hearing of the market’s relative stability.