Intel has borrowed $6 billion in a bid to part buy back stock, make bigger payments to its shareholders and avoid US tax hits.
The chip company, along with many other big corporations, is taking advantage of what the WSJ describes as “forgiving debt markets” and low interest rates for share buybacks and dividends.
It means that big companies can make these purchases and still leave money that is held abroad untouched, thus avoiding a heftyUS tax bill.
According to the WSJ, foreign income is taxed at a 35 percent rate, less the tax paid in a foreign jurisdiction. It works out much more expensive than borrowing from a US institution, where interest rates range from 0.75 percentage point to 1.50 points. And Intel is rolling in it. It recorded $3.5 billion of cash and $7 billion in short-term investments at the end of September.
It is also thought that the company had $14.2 billion of income earned and invested abroad at the end of last year.