Apple has sold 17 billion US dollars (£10.9 billion) in bonds in a record deal spurred by the company's plan to placate its frustrated shareholders.
The Cupertino, California-based company sold the bonds in its first debt issue since the 1990s to raise money to pass along to shareholders through dividend payments and stock buybacks. The payments are part of an effort to reverse a 37% drop in Apple's stock price during the past seven months amid intensifying concerns about the company's shrinking profit margins as it faces more competition in a mobile computing market that Apple revolutionised with its iPhone and iPad lines.
Apple has 145 billion dollars (£93.3 billion) in cash, more than enough for the 100 billion dollar (£64.3 billion) cash return programme it announced last week. But most of its money sits in overseas accounts, and the company does not plan to bring it to the U.S. unless the federal corporate tax rate is lowered.
With interest rates so low, it makes sense for Apple to borrow a large sum of money rather than pay a big tax bill. In addition, raising the money through a corporate bond sale gives Apple a tax benefit, because interest payments on corporate debt are tax-deductible.
The downturn in Apple's stock price obviously has not dampened bond investors' enthusiasm for one of the world's most prosperous companies. Demand for a piece of Apple's offering was so intense that bankers believe they could have sold twice as much debt, according to The Wall Street Journal.
As it is, the 17 billion dollar (£10.9 billion) bond offering is the biggest ever. The previous record for a corporate bond deal was set in 2009 when Swiss drug company Roche Holdings completed a 16.5 billion dollar (£16.5 billion) issue, according to research firm Dealogic.
With the demand outstripping the supply for the Apple bonds, the investment bankers were able to lower the interest rate to be paid on the debt.
Apple laid out its plans to issue six different types of bonds in a Tuesday regulatory filing. The bonds range in duration from three years to 30 years.