Apple Inc. (AAPL), Microsoft Corporation (MSFT) & Three Giants That Do Not Need to Borrow, But Did Anyway

Real-estate and relocation firm Realogy Holdings Corp (NYSE:RLGY) moved $500 million in a five-year, 3.375%, high-yield, or junk, issue. Yes, that’s “3.375%” and “high-yield” describing the same paper. The deal was up-sized from initial plans for $450 million. The money will be used for early redemption of some 11.5% paper. The company is paying a premium to redeem the existing paper but will save nearly $40 million in interest expenses. Realogy Holdings Corp (NYSE:RLGY) reported more than $500 million in losses last year, so the refinance helps, but the company has more work to do to turn a profit.

It seems strange that companies would rather borrow than use cash on the balance sheet to pay back debt, fund buybacks, and fund capital expenses. Some good reasons might be maintaining a large stash of cash as a hedge against higher rates in the future, avoiding taxes on funds held overseas, providing funding to customers if credit markets tighten again, or simply taking advantage of extra-low rates while enjoying the flexibility of having a boatload of cash on hand. My Foolish colleague Doug Ehrman explains why Apple Inc. (NASDAQ:AAPL) — with $145 billion in cash — might want to borrow.

The article 3 Companies That Don’t Need to Borrow — but Did Anyway originally appeared on Fool.com and is written by Russ Krull.

Russ Krull has no position in any stocks mentioned. The Motley Fool recommends Apple, Diageo, and Nike. The Motley Fool owns shares of Apple, Microsoft, and Nike.

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