Apple will reportedly issue its first yen-denominated bonds in June and has hired Goldman Sachs as underwriter, says a report from Nikkei citing sources familiar with the development. The U.S. company is determined to take advantage of the all-time low-interest rates in non-U.S. markets.
Using debt to reward shareholders
Apple is planning to issue around ¥200 billion ($1.6 billion) of yen-denominated bonds, and maximize shareholder returns through the proceeds and expand operations in Japan, claims the report. As of now, units of bonds and pricing have not been fixed and are subject to change with investor demand.
“Early this month, Apple started gauging potential demand for the yen-denominated bonds among regional banks, life insurers and other institutional investors,” says the report.
Since Japan’s central bank maintains a low interest rate with a huge monetary easing program, Japanese bond yields and issuance costs are one of the lowest compared to the world. The yen hit a low against the dollar of nearly eight years on Tuesday.
According to bond market investors, domestic investors will be attracted to the Apple issuance, provided it offers a generous yield. Irrespective of the massive amount of cash Apple has stashed abroad, proceeds from the debt funds have been used by Apple to reward shareholders in the form of dividends and share buybacks.
Apple a popular name in Japan
In Japan, Apple’s iPhone is one of the most popular handsets and has taken over from domestic handset makers Sony and Sharp and international peers such as Samsung Electronics.
In December, the Cupertino, Calif.-based company said that it would open a new research site near Yokohama following Prime Minister Shinzo Abe’s announcement that the U.S. company will invest in Japan. Apple also talked about its plan of taking over part of a former Panasonic factory to construct a four-story building there. The iPhone maker will reportedly work in the direction by the end of this year. Apple has opened research and development sites in various countries across the world apart from its headquarters in Cupertino, Calif.
It’s not the first time when Apple is going off-shore to raise cash. Previously, Apple completed the sale of bonds in Switzerland to cash in on the low borrowing cost in the country. Also the company raised debts in euros.