This is something of a shocker: Apple is issuing $17 billion in bonds, which basically means that Apple is assuming $17 billion of debt. It's the first time Cupertino has issued bonds since the 90s, but the situations could not be any more different.
20 years ago, Apple was still struggling to compete for market share. Today, the company sits on $145 billion worth of cash. So why would the company go into debt when it already has so much cash on its balance sheet?
Apple CFO Pete Oppenheimer was pretty candid about the reasoning in an earnings call: "We are continuing to generate significant cash offshore," Oppenheimer told press and analysts. "And repatriating this cash would result in significant tax consequences under current U.S. tax law."
According to Wired, those tax consequences would truly be severe for Apple. Current U.S. tax law would eat up about 35 percent of Apple holdings if they were brought back to the States whereas overseas, Apple's effective tax rate is somewhere around 0.84 percent. Apple has stated publically that it has no intention of repatriating its foreign funds unless the U.S. opts to lower the current tax rate.
What does Apple need the cash for in the first place, though? Again, the answer is pretty simple. Last week, Cupertino announced a plan to pay out $100 billion in cash to its shareholders, which it can more than afford to do with its $145 billion cash reserve. It simply makes better business sense for them to borrow the money than to use the funds they already have.
Apple had no trouble moving the $17 billion in bonds. According to the Wall Street Journal, there was $52 billion worth of demand for the debt notes. Cupertino borrowed $5.5 billion for 10 years at a 2.415 percent annual yield. Additionally, three-year notes were issued at a yield of 0.511 percent, while five-year debt had a rate of 3.883 percent.
