AA-pple Bonds and Dividends

Apple announced that it was raising its quarterly dividend by 15 percent to $3.05 per share and that it would increase its share buyback program by $50 billion to a total of $60 billion. To fund these cash flows to shareholders, Apple plans to issue debt in the near future. Given that Apple has about $145 billion in cash on its balance sheet and generated $48 billion in free cash flow last year, you might expect a top bond rating for the yet to be issued ibonds, but S&P and Moody's announced bond ratings of AA+ and Aa1, respectively. It is believed that Apple is funding the buyback with bonds since the tax deductibility of the coupon payments will result in cheaper capital than if the company paid taxes on the repatriation of cash from its overseas subsidiaries.