EBay Skirts Repatriation with Bond

Sale of $3 bln of debt allows company to avoid paying taxes on overseas earnings brought back to U.S.

EBay Inc. is taking advantage of record low interest rates to raise domestic funds it may use to reward shareholders while avoiding U.S. repatriation tax on the 87 percent of its cash held overseas.

The Internet marketplace, whose borrowing costs are about half that of other technology and electronic firms, paid a rate that’s less than 90 percent of all investment-grade issues this year with a four-part offering on July 19, according to data compiled by Bloomberg. The San Jose, California-based company had $8 billion of cash on June 30, about $7 billion of which was outside the U.S.

‘Best Times’

“They are being opportunistic to catch the window and increase their onshore cash,” which may be used for share repurchases, Colin Gillis, an analyst at electronic brokerage BGC Partners LP in New York, said in a telephone interview. “This is probably one of the best times to be issuing debt if you’re a high-quality, high-cash-flow company.”

‘Wonderful Benefit’

“A huge chunk of our cash and our cash flows are offshore,” EBay’s Swan said at Morgan Stanley’s Technology, Media & Telecom Conference in February 2011. “That inhibits our flexibility a bit right now to think about alternative redistribution strategies like a dividend.”

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