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Apple borrows $8.5B, joins record corporate debt borrowing spree

30 points by spking 6y ago

erentz 6y ago
Capitalism has become so distorted by worldwide zero and negative interest rate policies. We have 30 million newly unemployed, predicted to rise to 34% unemployed in Q2, the stock market is about 2% away from its start this year. And here this company that bought back a whopping 1/3rd of its stock over the past 6 years, that still has $190 billion cash on hand is still issuing debt.
- linuxftw 6y ago
  The Fed promised to monetize corporate bonds this time around, so you'd be stupid not to issue debt right now. Something tells me this plan is unsustainable.
- nojito 6y ago
  The stock market isn’t the economy. Equating the two is a big mistake.
canada_dry 6y ago
> $190 billion cash hoard Can someone explain why are they accessing the bond market when they have one of the largest cash reserves in American corporate history? Is it simply because it's so cheap - just 60 points above gov't bonds?
- mikeyouse 6y ago
  It’s very likely a tax arbitrage.. much of their profit is overseas and repatriating it would cost money (even under the lowered rates from Trump tax cuts). So they can take out loans in the US and payout dividends or repurchase shares to give money to shareholders today while deferring taxes further to the future or wait for another repatriation holiday.
  - ashtonkem 6y ago
    Even more perversely, they can use those foreign profits as a guarantee on their loans, reducing the interest rate they have to pay. Best case they pay a super low bond rate, worst case they repatriate their profits to repay debts and pay some taxes.
- GoOnThenDoTell 6y ago
  Maybe the money is in the wrong country and they’d have to pay more in taxes to use it than the bond rate
- AQuantized 6y ago
  They're getting good terms on the debt. During the recent Berkshire shareholder meeting Warren Buffett mentioned that Berkshire Hathaway raised a few billion in additional capital despite already having cash reserves of over $120 billion, simply because it's a good time to be a borrower. As I understand it, this is largely due to the Federal Reserve signalling their intent to act as a backstop to the bond market due to the impact of COVID-19.

30 points by spking 6y ago

Capitalism has become so distorted by worldwide zero and negative interest rate policies. We have 30 million newly unemployed, predicted to rise to 34% unemployed in Q2, the stock market is about 2% away from its start this year. And here this company that bought back a whopping 1/3rd of its stock over the past 6 years, that still has $190 billion cash on hand is still issuing debt.

linuxftw 6y ago
The Fed promised to monetize corporate bonds this time around, so you'd be stupid not to issue debt right now. Something tells me this plan is unsustainable.
nojito 6y ago
The stock market isn’t the economy. Equating the two is a big mistake.

canada_dry 6y ago

> $190 billion cash hoard Can someone explain why are they accessing the bond market when they have one of the largest cash reserves in American corporate history? Is it simply because it's so cheap - just 60 points above gov't bonds?

mikeyouse 6y ago
It’s very likely a tax arbitrage.. much of their profit is overseas and repatriating it would cost money (even under the lowered rates from Trump tax cuts). So they can take out loans in the US and payout dividends or repurchase shares to give money to shareholders today while deferring taxes further to the future or wait for another repatriation holiday.
- ashtonkem 6y ago
  Even more perversely, they can use those foreign profits as a guarantee on their loans, reducing the interest rate they have to pay. Best case they pay a super low bond rate, worst case they repatriate their profits to repay debts and pay some taxes.
GoOnThenDoTell 6y ago
Maybe the money is in the wrong country and they’d have to pay more in taxes to use it than the bond rate
AQuantized 6y ago
They're getting good terms on the debt. During the recent Berkshire shareholder meeting Warren Buffett mentioned that Berkshire Hathaway raised a few billion in additional capital despite already having cash reserves of over $120 billion, simply because it's a good time to be a borrower. As I understand it, this is largely due to the Federal Reserve signalling their intent to act as a backstop to the bond market due to the impact of COVID-19.