Apple bond math

http://www.forbes.com/sites/spleverage/2013/04/30/debt-averse-apple-sets-6-part-bond-deal-to-establish-funding-yield-curve/

"Apple today filed to sell three- and five-year issues in both fixed- and floating-rate formats, along with fixed-rate, 10- and 30-year issues. Initial whispers circulated in the L+20 and T+35 areas for the three-year issues; in the L+40 and T+55 areas for the five-year issues; in the T+90-95 range for the 10-year issue; and in the T+115-120 range for the 30-year issue.

The midpoints of initial price talk levels point Apple to fixed-rate reoffer yields in the 0.65% area for three-year notes, the 1.21% area for five-year notes, the 2.57% area for 10-year notes, and the 4.01% area for 30-year bonds."

Using my trusty BAII Plus, how do you calculate the 4.01% for lets say a $1MM issue? Not sure how to use T+115-120 to understand both the PV and PMT. FV = $1,000,000 N = 30 PV = ? PMT =? Yield = calculated to be 4.01

PV =1mm.

Semi-annual payments - N=60.

PMT = 19,650 / semi-annual based on 3.93 yield.

Revised guidance for the 43s, T+105 - Y = 3.93/2

I think the books ran over $50 billion. Way oversubscribed.

Apparently, Apple is borrowing money because $100 billion of their cash is abroad. If they bring it to the US, they will have to pay tax. But still, probably feels good for bondholders to know that that cash hoard exists, even if it is not immediately accessible.

^ You would think. But it depends on what they’re likely to do with the cash if they repatriate it. Moody’s is known to severely haircut foreign cash if there’s even a hint it would be used for shareholders. You see it a lot in the pharm industry.

Sorry. What do you mean by 43s? What’s T+105 - Y?

Apple is floating the bond because think about it… for arguments sake they have $100B abroad. To bring it back would net 65B after taxes. If you assume 4% interest (probably too high of an assumption) across the 17B thats only 440M in interest after taxes.

US corporate taxes are already among the highest in the world and I seriously doubt they will go higher, so you’re in a situation where you can pay the 35% now, or worst case scenario, pay the 35% later. They, MSFT, and every other tech company is just waiting out the tax game because they know that eventually the tax rate will probably fall, and paying after tax interest in the neighborhood of 3% (or less right now) to keep paying dividends and retiring shares is well worth it. Not to mention it costs the govt lost tax revenue due to the interest deduction. Yay.

What a crazy system. The great irony is that a lot of that offshore cash is probably invested in US based govt and corporate bonds via the international banks that are holding these offshore cash piles. Think, if you have a UK bank account and you invest the money in your Barclays account in a US bond fund from the UK… you’re still getting cash sourced from the US just funneled via the UK.