Apple Taps Markets For Record $17bn Funding

Apple has raised $17bn (£10.9bn) via a bond sale, the biggest ever by a non-banking company, to help fund its plan for extra payouts to shareholders.

Last week, it said it will buy back $60bn in shares, and raise its dividend to shareholders by 15%.

Apple’s bond sale, its first in nearly two decades, comes despite the firm having cash reserves of $145bn.

However, most of that money is sitting in accounts outside the US and would be liable for US taxes if repatriated.

At the same time, interest rates in the US are currently near record lows – helping drive down cost of raising funds for companies.

That makes it cheaper for Apple to raise the money through a bond issue, even though it will attract interest payments.

‘Something everyone wants’

The money will be used to fund special payments to shareholders who, after years of seeing their shares rise in value, have become frustrated in recent months.

Apple shares have dipped nearly 40% after hitting an all-time-high in September last year.

The fall has been triggered by concerns over future growth of the firm, not least due to the success of rivals such as Samsung which have increased their share of the smartphone and tablet PC markets, which Apple used to dominate.

Earlier this month, Apple reported its first quarterly drop in profits in 10 years.

It made a net profit of $9.5bn in the January to March quarter, down from $11.6bn last year.

But the results were better than many had expected, as strong iPhone and iPad sales boosted revenues to $43.6bn.

Despite the drop in earnings, Apple unveiled plans to pass some of its giant cash pile back to investors, sparking a slight rebound in its shares over the past week.

The bond sale generated massive interest among investors. According to some reports, the company had received orders for nearly $50bn, almost three times the amount being offered.

Analysts said that Apple’s dominant market share in various product categories, coupled with a strong balance sheet, made it an attractive investment option.

“Apple made its intentions clear that this deal is for shareholder-friendly activity, but they have tremendous metrics and brand recognition,” said Rajeev Sharma, portfolio manager at First Investors Management.

“Apple is something everyone wants in their portfolio.”

BBC