Apple (NASDAQ:AAPL) confirmed last week during earnings that it would be issuing more debt in the form of floating rate and fixed rate bonds, in order to facilitate its programs to return capital to shareholders. This will be the second year in a row that the company issued such bonds, and much like last year, the timing could work out quite well for the company, with interest rates rising shortly after the offering last year, and potentially being poised to do the same again this year. The total bond issue ended up at $12 billion, which should bring Apple's total long-term debt to approximately $29 billion.
In this segment from Tuesday's Investor Beat, host Erin Kennedy and Motley Fool tech and telecom bureau chief Evan Niu discuss Apple, and why these bonds are necessary. Despite the company's recent declines in domestic capital due to its capital distributions to shareholders, Apple's continued successes internationally have left the company with $132.2 billion held in cash abroad. Returning that cash to the U.S. however would mean a very hefty 35% repatriation tax. Evan discusses why this bond issuance represents a tax-efficient way to repurchase shares, and he also takes a look at how long Apple could continue to issue debt in this way before it represented a financial risk to the company.
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Erin Kennedy owns shares of Apple. Evan Niu, CFA owns shares of Apple. Evan Niu, CFA has the following options: long January 2015 $460 calls on Apple and short January 2015 $480 calls on Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.