According to a published report, Apple started selling $17 billion in bonds on Tuesday. This might represent the largest corporate bond issues in the history of the Cupertino-based company.
The bond sale represents the first debt issues since 1990s, when the company encountered its first serious problems. With this movement, Apple is trying to raise money in order to give them to shareholders through dividend payments and stock buybacks. The company owns more than $145 billion in cash, which is more than enough for the $100 billion cash return program. The entire cash amount is stored overseas, in various countries in order to avoid the federal corporate tax rate. Those who are familiar with this topic know that the tax rate in US is pretty high, especially for a big company such as the Fruit Company.
According to the Wall Street Journal, the total value of the debt is high and various bond market participants were involved within this matter. The official report released suggests the fact that the bonds will become even lower than expected, more precisely, lower than Apple’s credit rating would imply. All bonds come in three-year packages called maturities.
Compared to Microsoft, Apple Inc. paid higher interest rated on a record $17 billion bond sales. In the case of Apple, the demand for debt reached $54 billion, which is not such as high amount of money. The company shows an unprecedented low coupon of 0.45% for corporate three-year debt on Tuesday.
This comes as a response to the investors’ demand for higher yields of fixed rate portion of 5, 10 and 30-year securities or maturity notes. The iPhone 5 sales were meant to help finance $100 billion in dividends and buybacks after the shares dropped with 44% in the past seven months.
In the eyes of shareholders and buyers, Apple is regarded as being a marginally higher risk company with an instable economic and financial situation. Alan Shepard suggests the fact that Apple does not diversify its premium products revenues as it should. From this aspect, the company finds it hard to deal with each aspect.
Again, in a straight comparison with Microsoft, the Fruit Company has transformed a lot in the past four years. Starting as a near-bankrupt personal-computer to the world’s largest technology company offering the famous iPhone, iPad and iPod, Apple has showed increased annual sales growth with 10 times more than the Windows 8 designer in the last four years.
What make Apple riskier than Microsoft are all those lower-cost mobile devices. Until Apple does not offer something interesting, appalling and amazing in the same time to catch the public’s attention, things will still be a little bit too slippery for the Cupertino-based company.