Apple offers more bonds to finance its $300 billion capital return program

Apple just started selling new bonds in order to finance a share buyback program and dividends for shareholders, as Bloomberg spotted in a filing. This is counterintuitive, as Apple is sitting on a big pile of cash and probably doesn’t need to issue bonds. But most of the company’s cash is outside of the U.S.

During Apple’s fourth-quarter earnings call, the company said that it had $268.9 billion in cash and marketable securities. And yet, 94 percent of this cash is currently outside of the U.S.

As of today, Apple would pay 35 percent if it brought that money back in the U.S. While President Trump’s administration has promised that companies would only pay 12 percent on overseas profit, it is just a plan for now.

Apple can’t wait for that tax reform. In addition to that, the company wants to keep some cash in the U.S. — it is currently holding around $16 billion in cash and cash equivalent in the U.S., so Apple can’t even buy a WhatsApp right now.

The company issued $7 billion in debt last quarter, and it now plans to do the same thing. In other words, it’s cheaper to issue short-term, medium-term and long-term bonds than to repatriate overseas profit.

Apple isn’t going to use this cash directly. The company plans to spend that money in share buybacks and dividends. Apple has promised that it would spend $300 billion in a capital return program by the end of March 2019. Bloomberg says that Apple has already returned more than $225 billion.

Details of today’s new round of bonds are still unclear. The company plans to offer fixed-rate bonds in up to six parts. But if Apple continues to sell bonds at the same pace, you can expect to see billions in Apple bonds on the debt market pretty soon.