Apple is planning on borrowing US$5 billion for what it is calling "general corporate purposes." The new debt could come this week even though the company has over $170 billion in the bank. While Apple is being vague about its plans for the money, it will likely go to stock buybacks and shareholder dividend payments.
Apple taking on $5 billion in debt following record quarterly earnings report
News of Apple's plans comes courtesy of an SEC filing submitted Monday morning. The new debt will come as a mix of fixed-rate and float-rate notes, and the deal will be manages by Goldman Sachs and Deutsche Bank.
The new debt plan follows the company's first quarter 2015 earnings conference call last week where it reported $74.6 billion in revenue and $18 billion in earnings. Apple reported its best quarter ever, and the best quarter for any company.
Borrowing money instead of using its own cash reserves is most likely a way to avoid bringing earnings from other countries into the United States. The tax rates Apple would pay—about 35 percent—are far higher than the rates around 1 percent it will get from taking on more debt.
The filing also follows the announcement of a repatriation bill co-sponsored by Barbara Boxer (D-CA) and Rand Paul (R-KY). Their bill proposes to give big companies a substantial tax break to bring cash into the country for specific uses, and that the tax revenue generated will go to the Highway Trust Fund.
Currently, U.S. corporations tend to leave their off shore money outside of the country to avoid paying the substantial taxes they would incur for bringing funds state side. IN Apple's case, borrowing will be far cheaper, and won't impact the company's other routine expenses.
Goldman Sachs and Deutsche Bank are expected to sell the debt as early as today.