3 Companies That Don't Need to Borrow -- but Did Anyway

New issues in U.S. corporate bond markets topped $36 billion last week, with at least two companies borrowing and one company planning to borrow while their balance sheets are loaded with cash. Here are a few of the highlights.

There will be one more way to get a bite of Apple (NASDAQ: AAPL  ) soon. The company released a new plan to return capital to shareholders, including a dividend raise and a $50 billion increase in its share repurchase authorization. According to the press release, "In conjunction with the expanded return of capital program, the Company plans to borrow and expects to announce more details about this in the near future." Given Apple's huge cash balance and profitable operations, expect the bonds to price with very low yields when they are announced. At the new dividend rate, the debt service will probably cost less than the dividend payouts on repurchased stock.

Microsoft (NASDAQ: MSFT  ) entered "AAA" for credit rating and output coupon rates of 1%, 2.375%, and 3.75% for the company's $1.95 billion of five-, 10-, and 30-year notes. The "Use of Proceeds" statement in the SEC filing told of "funding for working capital, capital expenditures, repurchases of our capital stock, acquisitions and repayment of our existing debt." A search at FINRA turned up $1 billion of debt maturing this September. With a current dividend yield of 2.9%, the payout savings from share buybacks would be more than the debt service costs on 10-year and shorter-maturity paper. Like Apple, Microsoft has enough cash on its balance sheet that it doesn't need to borrow. The company also issued 550 million euros in 20-year notes last week.

Nike (NYSE: NKE  ) joined the debt game with $1 billion split between 10- and 30-year paper. According to the "Use of Proceeds" statement, the money is going toward "discharging or refinancing of debt, working capital, capital expenditures, share repurchases, as yet unplanned acquisitions of assets or businesses and investments in subsidiaries." The company's latest balance sheet only shows $361 million in debt, so that leaves plenty for the other uses. Like the two big tech companies, Nike has enough current assets that it shouldn't need to borrow.

Adult-beverage producer Diageo (NYSE: DEO  ) poured out $3.25 billion in four shots with maturities ranging from three- to 30-years. The money is being used to repay 1.15 billion euros of 5.5% debt and some commercial paper. The move should save Diageo about $15 million per year.

Real-estate and relocation firm Realogy (NYSE: RLGY  ) moved $500 million in a five-year, 3.375%, high-yield, or junk, issue. Yes, that's "3.375%" and "high-yield" describing the same paper. The deal was up-sized from initial plans for $450 million. The money will be used for early redemption of some 11.5% paper. The company is paying a premium to redeem the existing paper but will save nearly $40 million in interest expenses. Realogy reported more than $500 million in losses last year, so the refinance helps, but the company has more work to do to turn a profit.

It seems strange that companies would rather borrow than use cash on the balance sheet to pay back debt, fund buybacks, and fund capital expenses. Some good reasons might be maintaining a large stash of cash as a hedge against higher rates in the future, avoiding taxes on funds held overseas, providing funding to customers if credit markets tighten again, or simply taking advantage of extra-low rates while enjoying the flexibility of having a boatload of cash on hand. My Foolish colleague Doug Ehrman explains why Apple -- with $145 billion in cash -- might want to borrow.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons both to buy and to sell Apple, as well as what opportunities remain for the company (and your portfolio) going forward. To get instant access to his latest thoughts on Apple, simply click here now.

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