Apple Files to Sell Debt, Likely to Fund Dividends and Share Buybacks

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Apple Inc. (NASDAQ: AAPL) is not at all a company you would expect to raise capital via a stock or bond sale. The company’s share buybacks and dividends are not exactly the driving force that many investors might have hoped for. Now Apple has filed its S-3 Automatic Shelf Registration Statement with the Securities & Exchange Commission that will allow the consumer electronics giant to raise capital and the offering is to consist of debt securities.

On a Friday afternoon dividend interview I did with Mario Bartoromo on CNBC, she asked me about Apple’s ability to significantly return capital to shareholders. The issue that I brought up is that Apple cannot get to all of its cash because it has billions upon billions of dollars housed overseas in Europe and Asia where its sales are taking place.

Apple was not specific about its intended use of the proceeds in the filing. It simply said, “When we offer to sell a particular series of debt securities, we will describe the specific terms and conditions of the series in a prospectus supplement to this prospectus. We will also indicate in the applicable prospectus supplement whether the general terms and conditions described in this prospectus apply to the series of debt securities. The terms and conditions of the debt securities of a series may be different in one or more respects from the terms and conditions described below. If so, those differences will be described in the applicable prospectus supplement.”

Apple event went on to say, “We may offer the debt securities from time to time in as many distinct series as we may determine. The indenture does not limit the amount of debt securities that we may issue under that indenture.”

The reality is that Apple should not need to raise capital, but it would be taxed heavily if it repatriated the billions of dollars of capital kept overseas. This is the first wave of an attempt to raise capital so that the company can more rapidly fund its dividends and share buybacks out to 2015.

Apple shares are up 3.3% at $431.11 on the day against a 52-week trading range of $385.10 to $705.07.