Apple Plans to Borrow to Fund Bigger Capital-Return Program

Apple Inc. (AAPL), the debt-free maker of the iPhone, said it plans to borrow to help finance an expanded program to return capital to shareholders.

Apple will sell an unspecified amount of debt as it returns $55 billion in cash to equity investors in a push to compensate for a share price that’s been hammered by signs of slower growth. The company has no outstanding bonds, according to data compiled by Bloomberg.

“The company plans to borrow and expects to announce more details about this in the near future,” Cupertino, California- based Apple said in a statement as it reported fiscal second- quarter net income that fell 18 percent to $9.55 billion, or $10.09 a share.

Standard & Poor’s gave the company its AA+ grade, the second-highest level of investment grade, and Moody’s Investors Service ranked Apple an equivalent Aa1, according to statements issued by the ratings firms.

Apple may be lifted to Moody’s top Aaa grade if changes in U.S. corporate tax laws allow the company to repatriate cash held overseas on a more tax-efficient basis, reducing the need to borrow, wrote Gerald Granovsky, a senior vice president in that ratings firm’s corporate finance group.

At S&P, analyst Martha P. Toll-Reed wrote that Apple’s potential for an upgrade is “constrained” by “highly competitive and rapidly evolving market conditions.”

Apple could potentially sell $21.3 billion of debt and still have the average debt-to-equity ratio of a top-rated company, Bloomberg data show.

To contact the reporter on this story: Matt Robinson in New York at mrobinson55@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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