Proceeds from Apple’s sale will be used for general corporate purposes. That could include stock repurchases, dividend payments, working capital, capital expenditures, acquisitions and repayment of debt, the person said. The sale was the first for Apple since it sold $5.5 billion to fund buybacks and dividends in August.
I always thought that Apple was a cash rich company. Why would a company issue a bond, get cash, to repurchase shares/dividend payment. The company is paying interest on these bonds to repurchase its own shares or give out dividends. Is this in the interest of the shareholders.
From the investors points of view, is it a great idea to invest in a company for 30 years. The longest tenor is 30 years. At one time, there was ony Nokia. Everyone wanted Nokia. Wonder how many years has passed - nobody wants nokia. Is this not a risk for the investors in these bonds - maybe there is a secondary market for these bonds.
30 years are generally great if it is treasury bonds
Apple is a cash rich company. Cash rich company also some time borrow mainly because probably cash they have earns them better return then what they pay in interest. Reliance in India regularly does this. If you check their balance sheet, they generally have huge debt as well as huge cash / Investments.
Apple’s case is also slightly different. They have huge cash but not all of it is in US company’s book. A lot of it is in foreign subsidiaries (Ireland and maybe some Asian) and they are unable to bring it back easily as US taxes such cash reparation heavily. Apple is trying to cut a deal with US govt for this.
Umm, again 30 years is not new. Lot of company does this. Some Indian companies have also raised such longer duration bonds in foreign market.
There is a huge secondary market for corporate bonds in US. And this bonds get traded frequently. US also has a big market for Credit default Swaps - CDS - in layman term insurance policy against a bond default. So practically you can also by an insurance against these bonds defaulting
In general, this bonds would be bought by Institutional investors and not retail public. And generally their thought process and investment needs are different. Only time will tell whether it was a great idea or not.