Apple Sells Billions in Debt, Funding Dividends and Share Buybacks

Terms and the size have not yet been formalized. So far we have seen that Apple will have two floating rate notes with maturities in 2016 and 2018. Then there will be fixed rate notes and bonds due in the years 2016, 2018, 2023 and even 2043. Be advised that Fitch gave Apple a much more cautious preliminary corporate credit rating profile yesterday that put it behind Microsoft Corp. (NASDAQ: MSFT) and other technology giants.

Apple will use the net proceeds from sales of the notes for general corporate purposes. This is said to include the repurchase of its common stock and payment of dividends under its recently expanded program to return capital to shareholders. On April 23, 2013, the consumer electronics giant announced that it has increased its existing share repurchase program authorization from $10 billion to $60 billion and raised its third quarter 2013 cash dividend by 15%.

This debt offering gives the company better access to capital in America where the repurchases will occur. As I said in our CNBC dividend interview with Mario Bartoromo on Friday, the bulk of Apple’s $100+ billion in cash is now overseas because that is where so much of its sales take place. To repatriate that capital would come with an added taxation, and the company obviously feels like it is cheaper to borrow money in the debt market than it is to pay higher tax rates.