Whether it was a bit of luck, a strategic planned move, or a bit of both, Apple’s recent bond issuance was done just before the market for bonds began to turn, saving the Cupertino California company more than $724 million in interest savings on the debt incurred. In order to return $100 billion to shareholders by 2015, Apple issued its first bond sale in 17 years, borrowing $17 billion in the largest sale of its kind. Apple’s bond issuance beat out the previous record holder, Roche Holding AG, by half a billion dollars. According to an analysis from Bloomberg, the bond sale was perfectly timed, allowing Apple to capture low yields and saving the company an initial $40 million in annual interest payments on the six bonds it sold.
On the day Apple issued its bond offering, the yield on 10-year Treasury bonds, the basis upon which the rest of the industry determines its own rates, stood at 1.67%. By the end of last week, this same exact figure had risen to 2.13%. The manager of the world’s biggest fixed-income fund said she believes that a three-decade-long-bull market in bonds ended the day before Apple issued its bonds, meaning that Apple got in just in time. According to one money manager:
That's real money, even to Apple. I don't know if it was insight or luck, but they timed the market very well.
These newly discovered savings come in addition to the tax savings that inspired the bond offering in the first place. By taking on $17 billion in debt, Apple was able to grow its quarterly dividend and repurchase shares, putting a floor under its stock price, which had been hammered in recent month. Going the debt route allowed Apple to avoid paying $9.2 billion in taxes to the United States government on profits earned abroad. Apple’s Chief Financial Officer, Peter Oppenheimer, said that incorporating debt into Apple’s capital structure would ultimately be beneficial to the company and an efficient use of its balance sheet. During the company’s quarterly earnings conference call, he said the following regarding the matter:
We will maintain sufficient domestic liquidity, to grow the business and execute capital expenditures and acquisitions. The program announced today will result in returning an average of $30 billion annually to shareholders.