NEW YORK (Reuters) – Alphabet Inc (GOOGL.O) on Monday borrowed $ 10 billion from the market for prime corporate debt, the largest bond issue from parent company Google, which it secured at its lowest cost of financing on record .
Of the proposed $ 10 billion, the five-year $ 1 billion tranche was issued with a 0.45% coupon, the lowest coupon seen at this maturity since Apple Inc (AAPL.O) issued a $ 1.5 billion 0.45% five-year note in 2013.
Investor appetite was fierce for the tech giant’s six-fold bond, as low interest rates and corporate bond purchases at the Federal Reserve continue to support issuance. The deal generated more than $ 31 billion in demand, according to Refinitiv IFR. Previously, Alphabet’s lowest coupon was 1.25% on a $ 1 billion note in May 2014.
“We are at a stage where these very high quality transmitters – of which Alphabet is one – will offer very, very tight prices. This is because there are a lot of buyers who need the money in the short term, no need to think about it. You get twice the yield on the five-year Treasury, ”said Tom Graff, head of fixed income at Brown Advisory.
Alphabet last week announced its first drop in quarterly sales in 16 years as a public company. However, its share price did not budge as the loss in sales was offset by a resumption in Google’s advertising activity.
“There is a very small set of companies that were already very high quality, that are not affected by the recession that we are going through now. And Google is one of them, ”Graff said.
Alphabet’s five-year slice is priced a bit higher than Amazon.com’s (AMZN.O) 0.40% three-year note issued in June, among the lowest corporate coupons on record. Alphabet’s 0.45% five-year tranche, however, was cheaper than Amazon’s June 2020 offering at the same maturity, priced at 0.80%.
Of the $ 10 billion offered, $ 4.5 billion from the seven, 20 and 40 year tranches will be used for general corporate purposes, including acquisitions. The remaining $ 5.5 billion will be used for green initiatives, the company said, the biggest corporate debt problem ever linked to environmental, social and governance efforts.
Reporting by Kate Duguid in New York; Edited by David Gregorio
Our standards:Thomson Reuters Trust Principles.