Apple offers bonds in euros to avoid US tax

Apple is debuting €2.8bn of bonds as the iPhone maker seeks to fund another round of shareholder rewards without using overseas cash that would be subject to US repatriation taxes.

The technology company is offering €1.4bn of eight-year notes and €1.4bn of 12-year securities, a source said.

Goldman Sachs Group and Deutsche Bank are managing the sale and the money will be used for share buybacks and dividends as well as other business purposes, the person said.

By borrowing in euros, California-based Apple can take advantage of a market with the lowest yields in six years relative to dollar-denominated debt. Apple — which has the biggest corporate cash hoard at $155bn (€123bn) — has raised $29bn from bond sales since 2013 to give back cash to its owners instead of repatriating overseas reserves.

“All-in funding levels in euros are so low for corporates at the moment it makes sense to issue here,” said Jens Vanbrabant, lead money manager at London-based ECM Asset Management, which oversees $8bn. “It’s much lower than dollars. There is no doubt investors will like the name.”

Josh Rosenstock, a spokesman for Apple, did not immediately respond to requests for comment on the bond sale.

Apple is marketing the eight-year securities to yield 30 basis points more than the benchmark midswap rate after initially offering a spread of about 40 basis points, according to the person familiar with the deal. The notes maturing in 12 years will pay 45 basis points more than midswaps, down from about 55 basis points.

The average spread for euro-denominated investment-grade bonds maturing between seven and 10 years is 94 basis points, according to Bank of America Merrill Lynch bond index data. “Apple is a highly regarded, high-rated credit and that is very much in demand right now,” said Umang Vithlani, Dublin-based head of credit at Fideuram Asset Management.

Apple has been pushed by activist investor Carl Icahn to accelerate its stock repurchase programme.

“Apple has already issued a lot in the dollar bond market to fund large share buybacks,” said Jon Brager, a senior credit analyst at Hermes Investment Management, which manages $45bn in assets. “They don’t want to overload their US investor base with additional issuance. This deal should be large. Apple could issue up to €2bn pretty easily.”

The company, which had authorised a $90bn share buyback programme, has repurchased $67.9bn of shares as of September 27, according to a regulatory filing last week. Apple also increased its quarterly dividend to 47c earlier this year, resulting in a capital returns programme that has increased to $130bn, the filing showed.


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