RT.com - May 1, 2013 - By Justin Sullivan
Apple sold $17 billion in bonds in a record deal set to prove the tech-giant is willing to reward longtime investors, as well as attract new ones. The deal comes amid a seven-month slump which has seen the company’s stock price drop by over a third.
Apple Inc. managed to borrow the money in six pieces at historically low costs on the back of declining Treasury interest rates, which determine the prices of corporate bonds.
The order book – a barometer of investor demand for the debt – for Apple’s first round offering reached $52 billion, exceeding the original estimate by $10 billion.
The California-based firm sold the bonds in an effort to raise money which will be handed back to shareholders in the form of dividend payments and stock buybacks. Apple had previously said it would borrow the funds as part of a broader plan to return some $100 billion to investors by the end of 2015.
The company’s first bond offer in two decades comes during a 37 per cent drop in Apple’s stock pricing over the last seven months, spurred by stiff competition in the mobile computing market which has seen the iPhone-maker’s share of the profit margin pie shrink.
Although the company is sitting on more than $145 billion in cash, much of its money remains overseas. Apple is unwilling to repatriate the money however, as it would be forced to hand over 35 per cent of it taxes under current US law. The estimated foreign tax rate Apple currently pays on its foreign earnings stands at $0.84 per cent, Jennifer Blouin, associate professor of accounting at the Wharton School, told Wired.
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