New York: Alphabet Inc (GOOGL.O) borrowed $10 billion in the investment-grade corporate bond market on Monday, which is the largest bond issuance in the history of Google’s parent company and obtained the bond with the lowest financing cost in history.
Among the US$10 billion bonds issued, the US$1 billion 5-year bond was issued at a 0.45% coupon, the lowest since Apple (AAPL.O) issued a US$1.5 billion 5-year coupon of 0.45%. Coupon. 2013.
As low interest rates and corporate bonds purchased from the Federal Reserve continue to support the issuance, investor demand for the six-part bond of the tech giant is extremely strong. According to Refinitiv IFR, the demand for the transaction exceeds $31 billion. Previously, Alphabet’s minimum coupon was 1.25% of the US$1 billion bill issued in May 2014.
“We’re at a stage where these extremely high-quality issuers – of which Alphabet is one – are going to price very very tight. That’s because there are a lot of buyers who need short-term, don’t-need-to-think-about-it money. You’re getting two times the yield on the five-year Treasury,” said Tom Graff, head of fixed income at Brown Advisory.
Last week, Alphabet reported its first quarterly decline in sales in 16 years. However, due to the recovery of Google’s advertising business offsetting sales losses, its stock price remained basically unchanged.
“There is a very narrow set of companies that were already super high quality, that are not impacted by this recession we’re going through right now. And Google is one of them,” said Graff.
The price of Alphabet’s five-year notes is only slightly higher than the 0.40% three-year notes issued by Amazon.com (AMZN.O) in June, which is the lowest corporate coupon ever. However, Alphabet’s 0.45% five-year payment is cheaper than Amazon’s equivalent price (0.80%) due in June 2020.
Of the US$10 billion provided, US$4.5 billion from the 7-year, 20-year and 40-year periods will be used for general corporate purposes, including acquisitions. The company said that the remaining US$5.5 billion will be used for the green plan, which is the largest corporate debt issuance in history for environmental, social and governance efforts.