Why Apple continues to go into debt


A record cash but an increasing debt. This is the paradoxical situation in which Apple is engaged. In financial documents sent on Tuesday, February 16, to the US authorities, the Apple group has indicated its intention to issue up to 12 billion dollars (10.8 billion euros) of bonds. This is not the first time he has done this type of operation. Since 2013, he has raised almost $ 80 billion. As a result, its debt, no more than three years ago, now stands at $ 63 billion.

These bond issues are part of an extensive shareholder compensation plan, announced in April 2013 to satisfy investors increasingly dissatisfied with the company’s stock performance – its share price has fallen by as much as 45% in the previous six months. Apple’s CEO Tim Cook promised $ 100 billion. First, by restoring the payment of a dividend, suspended for years, then by buying back its own shares.

In April 2014, this target had been increased to $ 130 billion. Then to 200 billion in April 2015. Apple has since executed. In its last fiscal year, closed at the end of September, the Cupertino company paid $ 11.6 billion in dividends to its shareholders or 22% of its annual profits. It also acquired $ 36 billion of its own shares – an operation that supports the stock price. Since 2013, Apple has redistributed 153 billion to its shareholders.


From the beginning, the firm opted for the issue of bonds to finance these different operations. At the time, however, its cash flow was $ 145 billion. It is today 216 billion, a record level. But almost all of this pot is blocked on accounts abroad. To repatriate this capital, the group should pay up to 35% of taxes. That’s several tens of billions of dollars that he refuses to pay, like many other American multinationals.

Apple executives plead for tax reform. “The tax code was designed for the industrial age, not for the digital age,” said Cook in December. It should have been changed many years ago. It is high time to do it. But in the absence of changes or tax amnesty, the company must continue its debt policy. At the end of December, it had more than $ 16 billion on its US accounts (7% of its cash), against $ 43 billion three years ago.


The use of bonds allows Apple to partially finance its dividends and share buybacks without having to repatriate cash from abroad. This is all the more interesting as interest rates for payday loan consolidation are currently very low www.gadenway.com/payday-installment-loans/ hop over to these guys. In April 2013, when the first issue was issued, the 10-year rate was set at only 2.415%. For the next issue, it will be 3,276%. The apple society is not alone in taking advantage of this favorable environment. At the end of January, its leaders explained that they would still be very “active” this year.

In fact, financial analysts anticipate the announcement of additional share buybacks when the quarterly results are released at the end of April. To finance them, Apple will certainly have to issue new bonds. The Moody’s rating agency estimates that the company’s debt could exceed $ 100 billion by the end of 2017. A high level, she warns, which could then lead to a downward revision from Apple’s rating, currently set at Aa1.