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As Its Domestic Cash Plunges By Record To Early 2010 Levels, Apple Prepares Massive $17 Billion Bond Offering

Tyler Durden's picture




 

While Apple's earnings report last week left little to be desired, one of the more notable observations was that the company's cash hoard, relentlessly rising until now, had seen its first quarterly dip since Lehman, declining by $8 billion from $158.8 billion to $150.6 billion. Which was to be expected: since the technological company has not had much success with "growthy" innovation since the arrival of Tim Cook, it has been forced to become an activist investor's favorite piggybank, buying back and dividending record amounts of cash. In fact, perhaps the most notable feature of its earnings release was that AAPL would boost its buyback plan by 50% to $90 billion.

One small problem: as everyone knows, when it comes to shareholder friendly actions, Apple can only rely on its domestic cash hoard. The foreign cash, unless it is repatriated and subject to substantial tax withholding, is for all buyback and dividend purposes, meaningless. Also, as most know, starting in 2010, there was a dramatic divergence between the amount of cash AAPL generates domestically versus how much it has in offshore bank accounts.

Which brings us to AAPL's most recent cash update between domestic and foreign holdings. Because while total cash may have dipped by $8 billion, foreign-held cash actually rose by $7.8 billion. Which means that Apple's domestic cash tumbled. By how much? The chart below has the answer.

As that highlighted yellow bar shows, AAPL domestic cash tumbled by a record amount, plunging by nearly half, or $16 billion to be specific, from $34 billion to $18 billion.

What this simply means is that after making the history books with the biggest ever, $17 billion bond offering 12 months ago, Apple is about to issue a whole lot more of debt. Sure enough, as FT reported moments ago, AAPL is preparing another $17 billion in debt, to follow the $17 billion it issued last year, which would make it the joint largest bond offering in history. Again. From the FT:

Apple is preparing the groundwork for another blockbuster debt sale in the region of $17bn that could rank as the second-largest corporate bond sale of all time.

 

Apple plans to use proceeds from the debt sale to fund the buyback rather than tap its $150bn cash pile. About $130bn of that cash is held overseas, 88 per cent of the total, and returning it to the US would lead to a tax charge of up to 35 per cent.

 

A foreign debt sale would probably target the eurozone, where interest rates are lower than in the US, and diversify Apple’s debt investor base.

 

During Apple’s quarterly results call last week, Luca Maestri, Apple’s incoming finance chief, warned that repatriating offshore cash would incur “significant” tax consequences.

 

Apple was likely to raise “an amount of term debt financing similar to what we issued in 2013”, he said, adding that preparations had also been made to tap the commercial paper market for short-term liquidity.

However, considering the less than smashing success of its first record bond offering (the 2043s are trading at 90, the 2023 at 93), this one may be a little more problematic to pull off, and AAPL may have no choice than to boost the cash coupon to find enough buyers who will likely be unable to flip the bonds on the next day.

The goods news for Apple is that unlike IBM, whose debt/capital ratio soared to the highest ever following its surge in debt-funded buybacks, it still has a lot of balance sheet capacity before it has to be worried about a debt downgrade to fund its returns to shareholders. The bad news, is that unless the company finds a way to boost domestic cashflow, or somehow put the offshore cash to good use, it won't be too long before Apple too, has no choice but to do what every other company is doing in the absence of top-line growth: issue record amounts of debt just to keep shareholders happy. 

Needless to say, this strategy works as long as rates are low, but once rates start rising, it stops working.

 

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Mon, 04/28/2014 - 11:22 | 4704032 Theta_Burn
Theta_Burn's picture

A screaming buy?

Mon, 04/28/2014 - 11:28 | 4704041 y3maxx
y3maxx's picture

...Another sign the American Apocolypse has begun folks... w/ Joe six pack's Mutual Fund $$$ being funneled into Apple's stock and taken out, thru Apple's Debt into the Banker's pockets.

Mon, 04/28/2014 - 11:38 | 4704070 Headbanger
Headbanger's picture

<-- Apple sucks!

<-- Android rules!

 

Mon, 04/28/2014 - 12:32 | 4704252 pods
pods's picture

I'll stick with my now uncool Blackberry Z10.  

On the bright side, at least I am not stuck with iTunes or need to be tethered to a wall outlet to use my phone for more than an hour.

pods

Mon, 04/28/2014 - 13:35 | 4704514 James_Cole
James_Cole's picture

You heard it here folks, aapl done gon broke. Only 150B in the bank and forward p/e 12, these guys are finished. Next week I figure 10$ stock, maybe pennies. This newest loan is the last straw...besides no one even buys their shit anymore, 47.3m iphones are you kidding me? Talk about a dead product. And iphone 6? Seriously guys, I predict 100 people buy that - all of them aapl employees. 

Mon, 04/28/2014 - 15:21 | 4704974 Theosebes Goodfellow
Theosebes Goodfellow's picture

James, at the risk of being rude, you have no idea what you're talking about. Apple isn't "going broke". It's doing smart business within the constraints of facing a confiscatory government. It is simply cheaper to take on cheap debt that it is to pay "confiscatory" taxes on off-shored profits. Move along folks, nothing to see here...

Mon, 04/28/2014 - 15:38 | 4705062 James_Cole
James_Cole's picture

Twas' sarcasm my good fellow..

Tue, 04/29/2014 - 00:59 | 4704082 SafelyGraze
SafelyGraze's picture

apropos of paying-taxes-when-you-repatriate-your-money..

the latest idea for a "smart" refrigerator borrows from this key concept

your purchases from the grocery store are basically free

but your "smart fridge" notes when you remove them and forwards that information to the taxing authorities so that you are taxed at the point-of-consumption (or at the point-of-derefrigeration)

this strategy accomplishes multiple goals

- nominal food prices continue to go down, as reported by retailers

- tax revenues increase, in order to help build new shipping lanes

- video monitoring of your food withdrawals helps keep you on your Fit-For-Life! program 

win-win-win

 

Mon, 04/28/2014 - 11:58 | 4704133 MarsInScorpio
MarsInScorpio's picture

y3maxx:

 

Jobs was a cult. Apple fans are the ultimate sheeple. They are closed-minded, self-righteous, condescending, arrogant, elitists.

 

Their products are amalgamations of previous products others invented. Give credit for uniquely putting the other items into new packages - but subtract that for not having any original products totally created by Apple.

 

Their computers are overpriced, underpowered, lacking software diversity, and highly susceptible to hacking, viri, hardware failure, and obsolescence. Their other products share these characteristics.

 

Tim Cook is nothing but a money-grubbing Jobs wannabe - down to wearing all black and a turtle neck. He lacks the Jobs evangelical gift, and therefore, the excitement is gone.

 

As for Apple users - they are like a Harvard grad: Do you know what you can tell a Harvard grad?

 

Nothing.

 

Sell while you can still get out. Despite Jobs self-anointed feelings of being a god - he isn't. Steve has left the universe, and unlike Elvis, he isn't coming back.

-30-

 

Mon, 04/28/2014 - 12:54 | 4704366 kchrisc
kchrisc's picture

Awesome and succinct analysis of one of the mechanisms of theft.

 

“If ;you guillotine a bankster in the woods, would anyone give a shit?”

Mon, 04/28/2014 - 11:35 | 4704066 rubiconsolutions
rubiconsolutions's picture

WWCD = What Would Cramer Do?

Mon, 04/28/2014 - 11:40 | 4704078 aVileRat
aVileRat's picture

On a related note:

 

http://recode.net/2014/04/28/former-ebay-and-pointroll-execs-busted-for-...

So, Ebay exec used his position on private company boards to funnel his friends into the next big promote. Carl was right ?

 

Mon, 04/28/2014 - 11:49 | 4704103 Seasmoke
Seasmoke's picture

Karl was right. 

Mon, 04/28/2014 - 11:58 | 4704132 disabledvet
disabledvet's picture

So was Groucho. And Oscar the Grouch.

And Grumps too...who we used to call grand dad...but not the last ten years.

Mon, 04/28/2014 - 13:07 | 4704420 kchrisc
kchrisc's picture

I'm getting good at this.

When I saw this post my very first thought was that this exec was most likely NOT a 'tribe' member. Bingo, bingo.

http://thezog.info/who-controls-e-bay/

After the "only 'non-tribe' members need be indicted" game at SAC, I have been paying attention, and let's just say if I had a batting average similar to my guess success rate I'd be famous and rich.

Though, if they ever indict Corzine, I'll have to go back to the minors.

Batters up!

Mon, 04/28/2014 - 14:38 | 4704774 daveO
daveO's picture

It becomes extremely easy when you look at things in that perspective. 

Mon, 04/28/2014 - 11:41 | 4704081 Dr. Engali
Dr. Engali's picture

Lie cheat and steal.

Mon, 04/28/2014 - 11:55 | 4704124 disabledvet
disabledvet's picture

Well after the total annihilation the last time for the Bag...err...Bond-holders...why not double down?!!!

In the mean time the "widows and orphans funds" have popped ten percent YTD while everyone else goes full on Debt Apocalypse.

Yep...winning! Jews have this one figured out perfectly! Why "limit order" yourself to Just Bank America when you can blow a veritable potpourri of State and Local Governments!

I mean WTF assholes. Ten years on and you douchebags are still Net Job LOSERS you stupid loser jerk wads.

Once you start blowing up pension funds "with interest rates at all time record lows" no less then I think the Mighty Mice will get the memo.

"This isn't about money but a Few Greedy Men." Broadcast live and in techno-color of course.

Mon, 04/28/2014 - 11:27 | 4704037 Cthonic
Cthonic's picture

Just watch, whomever lets these guys and their ilk repatriate tax-free, will be the next president.  When the rules no longer allow one to continue winning, change the rules.  K street bonuses all 'round.

Mon, 04/28/2014 - 11:26 | 4704038 bigdumbnugly
bigdumbnugly's picture

What this simply means is that after making the history books with the biggest ever, $17 billion bond offering 12 months ago, Apple is about to issue a whole lot more of debt. Sure enough, as FT reported moments ago, AAPL is preparing another $17 billion in debt, to follow the $17 billion it issued last year, which would make it the joint largest bond offering in history. Again.

 

monkey see - monkey do?

Mon, 04/28/2014 - 15:12 | 4704800 daveO
daveO's picture

This monkey is copying kchris.

 http://thezog.info/who-controls-apple/ 

I had to click on 'who controls apple?' on the right. 

63% of the board. Look out below!

The banksters make huge money on these bond sales.

Mon, 04/28/2014 - 11:26 | 4704039 NO SOLICITING
NO SOLICITING's picture

It's good to be the King.

Mon, 04/28/2014 - 11:28 | 4704048 XAU XAG
XAU XAG's picture

Debt

 

Is the reason the west is in such a mess

 

 

STACK ON

Mon, 04/28/2014 - 11:27 | 4704043 FieldingMellish
FieldingMellish's picture

Works for the US Govvy.

Mon, 04/28/2014 - 11:27 | 4704045 Colonel Klink
Colonel Klink's picture

Rotten Apple for a whole lot of reasons.

Mon, 04/28/2014 - 11:27 | 4704046 Robot Traders Mom
Robot Traders Mom's picture

Suckers all over the globe are foaming out the mouth to buy a little wider this time vs Tsy...

www.TopTheNews.com

Mon, 04/28/2014 - 11:28 | 4704049 CPL
CPL's picture

LOL!  Like it's a government.  Rediculious nonsense for consumer crap that's only en route to a land fill.  Apple must be about to do the same thing it did in the 90's.  I doubt Gates will bail them out this time.

The government more than likely will though via pension funds under 401k's and RRSP's.

Mon, 04/28/2014 - 11:29 | 4704052 Waterfallsparkles
Waterfallsparkles's picture

Stripping the Company of its cash can be dangerous.

Steve Jobs had it right.

Now they are bending to activists that are looking for a stock pop and then will move on leaving Aap with nothing but a decining stock price.

After all they did miss on the IPod numbers.  So they are selling fewer phones.

Mon, 04/28/2014 - 11:30 | 4704054 Ban KKiller
Ban KKiller's picture

Complex systems fail. Evolve or die or...become fascist. Yeah, thats the ticket. You HAVE to own isomething in the near future.

EBT/Phone/ID all in one. 

Mon, 04/28/2014 - 11:31 | 4704056 slightlyskeptical
slightlyskeptical's picture

So Apple is ripping off US taxpayers to the tune of about $50 billion. Nice.

Mon, 04/28/2014 - 11:38 | 4704061 Dr. Engali
Dr. Engali's picture

Well now that innovation is dead at the company it's time for the bankers and insiders to suck the bloated pig  dry. Ooops, the Nasdark is pooping again.

 

Edit: When my 71 year old mom is texting me (for the first time ever) from her new iGadget then you know the coolness factor is gone.

Mon, 04/28/2014 - 11:51 | 4704110 813kml
813kml's picture

You're lucky that your mom is that advanced, mine still has difficulty making phone calls with her dumb phone.

Now if she could only remember what a window is I might save a couple hours each day answering the same questions repeatedly.

Mon, 04/28/2014 - 11:54 | 4704119 Dr. Engali
Dr. Engali's picture

It shocked the shit out of me when she sent me her first text ("I love you honey"). I thought somebody was screwing with my head.

Mon, 04/28/2014 - 11:59 | 4704135 813kml
813kml's picture

If I ever receive a text from my mom I will know that she has been abducted by aliens.

Mon, 04/28/2014 - 11:33 | 4704064 Chuck Knoblauch
Chuck Knoblauch's picture

IT MIGHT AS WELL BE A T-BOND OFFERING!

Mon, 04/28/2014 - 11:43 | 4704075 ebworthen
ebworthen's picture

They're like a bank, a government, and a church in one.

Are they providing healthcare yet? 

Oh, that's just the Nurse and Doctor checking my coverage and scrip on their iPads.

After all, quality healthcare requires:  a Mac, an insurance company, the I.R.S., and 3,000+ pages of legislation.

"Amurika....Amurika...Jobs spread his grace on thee..."

What a circle jerk.

Mon, 04/28/2014 - 11:40 | 4704077 youngman
youngman's picture

This is the new corporate America...sell bonds to pay dividends and buy back stock that makes your stock options that much more valueable....it produces nothing but commissions....the new American manufacturing....paper..we make IOU paper...now you see why Putin is making his move and China is sidng with him...we are toast and they know it...

Mon, 04/28/2014 - 14:51 | 4704826 daveO
daveO's picture

Commissions and Cap. Gains for those at the top, or in the 'inner circle' of piranha. It ultimately comes from the 'bag holding' shareholders. Thanks, suckers.

Mon, 04/28/2014 - 11:40 | 4704080 LawsofPhysics
LawsofPhysics's picture

So, it would appear that apple is becoming a bank?

Makes sense, everyone now knows if you want to "profit" from the remaining theft that can be done, you have to become a bank.  The best part being the

Mon, 04/28/2014 - 11:44 | 4704087 Dr. Engali
Dr. Engali's picture

They don't make anything, and they've run out of ideas so they might as well rape the company. It's the American way.

Mon, 04/28/2014 - 11:53 | 4704118 813kml
813kml's picture

Any disruption to the Foxconn sweatshop will have serious repercussions from the younger generations.  That alone could start a war.

Mon, 04/28/2014 - 11:42 | 4704084 elwind45
elwind45's picture

Trying to raise çapital in Europe before EU QE or the dollar collapses?

Mon, 04/28/2014 - 11:42 | 4704085 buzzsaw99
buzzsaw99's picture

only $17B, lulz

Mon, 04/28/2014 - 11:55 | 4704123 ebworthen
ebworthen's picture

I know, right?  That's just a little more than 1/3 of one month of current FED QE!

Amateurs!

Mon, 04/28/2014 - 11:56 | 4704125 Comte d'herblay
Comte d&#039;herblay's picture

That's what happens when a homosensual is elevated to CEO for PC reasons.

He should be heading an Android device maker. 

Mon, 04/28/2014 - 14:53 | 4704837 daveO
daveO's picture

PC = Puppet Control.

Mon, 04/28/2014 - 12:00 | 4704142 Uchtdorf
Uchtdorf's picture

Betcha Valerie Jarrett has a plan to repatriate some of that cash held in foreign banks.

Mon, 04/28/2014 - 12:22 | 4704210 PoliticalRefuge...
PoliticalRefugeefromCalif.'s picture

Apple cleaned up a broken music industry with Itunes and Ipod, now they have been dragged into becoming just another commodity provider.

With no innovative vision in an increasingly competitive environment it's starting to look like a cannibal's picnic being planned through creative financing to let prime stock holders out the door.

..who would have thunk?

Mon, 04/28/2014 - 14:30 | 4704731 evernewecon
evernewecon's picture

 

 

If a couple ISP's own the net 

you might as well have a Coleco Adam

or Commodore 64, or the Radio Shack tape deck.

 

 

Mon, 04/28/2014 - 12:39 | 4704291 damicol
damicol's picture

The cabbage patch phone company is is set to defraud its small shareholders again.

No new whizz bang cabbage patch phones is a comin.

The smart money will be dumping this shit then moving to short

Mon, 04/28/2014 - 13:08 | 4704422 lasvegaspersona
lasvegaspersona's picture

Tim Cook is of questionable intellegence. He stated he did not want climate 'deniers' to buy his products. Since he is in a business which caters to smarter people I'd guess he just asked about half his customers to go elsewhere for their computer / fashion needs.

Mon, 04/28/2014 - 14:56 | 4704853 daveO
daveO's picture

I don't think that's questionable. He's there to drive it into a wall, ala Johnson at JCP.

Mon, 04/28/2014 - 13:14 | 4704446 q99x2
q99x2's picture

Didn't Apple make a Macintosh computer or something like that before they became financial fraudsters.

Mon, 04/28/2014 - 13:53 | 4704578 kellycriterion
kellycriterion's picture

And what would you have them do? Pay as much taxes as possible? That money would vanish into the mist and reappear in someone else pocket. Capex? Unless you have something really sexy to promote that's volunteering to be one of the bag holders.

No if you can tap into the easy OPM pipeline, you extract what you can and leave others holding the bag. Corporations aren't designed to reform society.

Why, why, why are ZeroHeroes so determined to confuse cause and effect? Why, why, why is it impossible for ZeroHeroes to acknowledge the inherent problems of managing the collective and focus on small, limited government as the only viable approach. By process of elimination, magical thinking is the only avenue left for ZeroHeroes. The first clause in the ZeroHero articles of incorporation are guns, ammo, and insurrection.

Mon, 04/28/2014 - 14:25 | 4704720 evernewecon
evernewecon's picture

 

 

Too bad for them ZH didn't hold back

on the GS headline.

http://www.zerohedge.com/news/2014-04-28/goldman-sachs-strongly-suggests...

 

Fed created another bubble for the banks?

 

They're going to buy that one two?  All for us?

Mon, 04/28/2014 - 15:30 | 4705015 Rusty Nayle
Rusty Nayle's picture

Why can't AAPL take some of those overseas cash holdings and buy gold and silver then repatriate the bullion and store it in a vault at one infinite loop?

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