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Apple Inc. (AAPL): A Question of Debt Over Taxes On $100B

Apple Inc. (NASDAQ:AAPL) is sending ripples through the markets – especially the bond market – as one of the world’s most valuable companies, and one with a cash hoard that swallows the market caps of Nokia Corporation (ADR) (NYSE:NOK), Research in Motion Ltd. (NASDAQ:BBRY), Netflix, Inc. (NASDAQ:NFLX) and Inc. (NASDAQ:AMZN) combined – with a little bit of lunch money left over – is preparing a six-step bond offering totaling about $100 billion to help fund both a share buyback program and increased dividend payments to Apple Inc. (NASDAQ:AAPL) shareholders over the next two years.

Apple is one of those global companies with an indelible international fingerprint all over the world’s economy. As such a multinational, it is intuitive to believe that a company such as Apple would have funds outside of the U.S. to help it run its operations in other countries – especially its Apple Inc. (NASDAQ:AAPL) retail stores, the various international iterations of iTunes and iCloud, among others. But could it be possible that Cupertino may have some cash available overseas with which it could use to give back to shareholders over time and still be able to run operations?

Being such a visible company with little history of debt – its last bond offering came in 1996 – and with so much cash on hand (and it brings in about $10-15 billion in cash each quarter, or about one Nokia), this move seems to beg the question – why? In its report detailing the bond offering – where Apple Inc. (NASDAQ:AAPL) will offer bonds with varying maturity dates  between 2015 out to 2043 – Bloomberg revealed that Apple currently has more than $100 billion sitting overseas, which would have easily paid for this stockholder allocation campaign by itself.

So why not repatriate the money?

Apple Inc. (AAPL) to be Added to Several WisdomTree ETFsAh, repatriation. It seems that in this world of political conversations about taxation and tax reform that this debt offering – and the possible reason for it – just might re-start the conversation in earnest.

The topic is repatriation of overseas money – we find it interesting that Apple Inc. (NASDAQ:AAPL) is willing to pay interest on $100 billion in bonds – which may come to about $175 billion if the bonds are taken to maturity – rather than pay the taxes on repatriating its estimated $105 billion in overseas money and use some of its existing cash haul in the U.S. to pay for this reallocation program.

What do you think? For such a large company, does taking out debt for this purpose make sense? What might this move by Apple suggest about repatriation of funds, and should it even be a topic of conversation on Capitol Hill? Give us your thoughts in the comments section below.


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