Apple (AAPL) Tuesday announced a plan to pile on even more debt even though the gadget maker already is the world's richest non-financial company.
The maker of smartphones filed with the Securities and Exchange Commission plans to sell a series of bonds maturing as soon as 2018 and as far out as 2046. The move might seem curious since Apple has $216 billion in cash and investments in the bank. It's really a financial engineering move that allows the company to delay paying U.S. taxes.
By borrowing Apple gets cash to pay dividends and buy back shares of stock without hauling its billions stored overseas back to the U.S., which could trigger a tax event. Investors applauded the move because they continue to be eager for the company to look for ways to get its cash back to them. Shares of Apple rose $2.11, or 2.3%, to $96.08. The company is also taking advantage of a recent rally in bonds, which was triggered by global uncertainty, that results in lower interest rates.
Apple's rampant borrowing the past few years is now longer just a sideshow, but turning into a major factor to the company's storied balance sheet. Apple now has $53 billion in long-term debt, making it the fourth most-indebted company in the Standard & Poor's 500 after General Electric (GE), AT&T (T) and Verizon (VZ), says S&P Global Market Intelligence. Apple - even before this latest borrowing - has more debt than cable operator Comcast (CMCSA) at $48.9 billion. Cable and telecom companies typically carry the most debt since they have stable cash flow and slow growth.
S&P 500 COMPANIES WITH MOST LONG-TERM DEBT
Company, symbol, L-T debt ($ billions)
General Electric, GE, $198.3
AT&T, T, $118.5
Verizon, VZ, $103.7
Apple, AAPL, $53.2
Comcast, CMCSA, $48.9
Source: S&P Global Market Intelligence, USA TODAY
What's noteworthy, too, is just how rapidly Apple has been piling on debt. Apple had no long-term debt whatsoever as recently as the end of fiscal 2012 ended in September. It then piled on nearly $17 billion in fiscal 2013, added another $12 billion in fiscal 2014 and boosted debt an additional $24.5 billion in fiscal 2015.
Despite the company's moves to add more debt, its enormous cash pile and cash-flow generation from selling $650 smartphones continues to give it the freedom to borrow. Apple's AA+ credit is just one notch below the perfect AAA credit rating.
Investors just can't stop looking at all that cash - and they want it - even if Apple borrows to give it to them.
S&P 500 COMPANIES WITH MOST CASH AND INVESTMENTS *
Company, symbol, cash and investments ($ billions)
Apple, AAPL, $216.1
Microsoft, MSFT, $113.8
Alphabet, GOOGL, $77.1
Cisco Systems, CSCO, $60.4
Oracle, ORCL, $54.4
* as of end of most recent year
Source: S&P Global Market Intelligence, USA TODAY
Follow Matt Krantz on Twitter @mattkrantz
