Apple Inc (NASDAQ:AAPL) turns to European bonds to make instant cash


It might seem greedy of Apple Inc (NASDAQ:AAPL) to move in on European bond deals since Apple Inc (NASDAQ:AAPL) is having a record run this year. But if we look closely, Apple Inc (NASDAQ:AAPL) is facing many hurdles that can neutralizes its success, financially speaking. Apple Inc (NASDAQ:AAPL) put record prices on its first ever non-dollar bonds and the eight year bond with 1.082 percent yield and a 12 year bond with 1.671 percent yield.

It comes off as a surprise for the market to witness Apple Inc (NASDAQ:AAPL) grappling for money through bonds but Apple Inc (NASDAQ:AAPL) is actually in a precarious predicament. First of all, Apple Inc (NASDAQ:AAPL) can’t even spend the money it has accumulated in cash. The reason behind that are taxes. Out of the 155 billion dollars, Apple Inc (NASDAQ:AAPL) put 137 billion in foreign subsidiaries. If Apple Inc (NASDAQ:AAPL) wishes to bring that money back to its native country, it will have to pay repatriation taxes.

Apple Inc (NASDAQ:AAPL) will be in need of monetary back up soon because Apple Inc (NASDAQ:AAPL) spent most of its money on dividends and share repurchases. Almost 94 billion dollars were spent upon dividends and repurchases, out of the 130 billion dollars program. The rest of the money is dedicated to the same purpose. Investors are urging Apple Inc (NASDAQ:AAPL) to strengthen its buybacks even more. They’re insisting that Apple Inc (NASDAQ:AAPL) isn’t aggressive when it comes to buybacks.

The Gods above are in Apple’s Inc (NASDAQ:AAPL) favor however, it witnessed a raise of 1.6 percent last Monday, which is an indication that a large buyback program might happen in the future. Europe would open a new investor base for Apple and it makes sense why Apple Inc (NASDAQ:AAPL) wants to sell its euro dominated bonds. Apple Inc (NASDAQ:AAPL) might lower costs when it comes to funding in Europe, because of the difference in interest rates there.

Apple Inc (NASDAQ:AAPL) isn’t the first company to be attracted by the glorious prospects of Europe. Many U.S based companies are venturing into Europe for cheaper cuts and various other accommodations, which are not possible in the U.S and even if they are, they’re too expensive. Apple Inc (NASDAQ:AAPL) can transform all the cash earned from the euro bond into U.S dollars and still get better terms than it would with simple U.S dollar bonds.

Other prospects include lower borrowing cost (no foreign exchange risk). Apple Inc (NASDAQ:AAPL) would be paying between 1.5 percent to 2 percent coupons on a euro deal. Apple Inc (NASDAQ:AAPL) is faced with two options if they want to use its off-shore cash. Either Apple Inc (NASDAQ:AAPL) gives in to the tax obligations, or Apple Inc (NASDAQ:AAPL) continues spending off-shore and waits till they can make more money in U.S.

How hard can the tax obligations hit Apple nobody knows the exact numbers but by the looks of things, Apple Inc (NASDAQ:AAPL) doesn’t want to get into that at all.