Alphabet kicks off €6 billion bond sale, tests appetite for tech debt

Alphabet Launches €6 Billion Bond Sale, Testing Appetite for Tech Debt

By Dhara Ranasinghe, Anzar Mehraj and Yoruk Bahceli

Alphabet's Bond Sale Amidst Tech Market Volatility

Details of the Bond Offering

LONDON, Nov 2 (Reuters) - Google parent Alphabet is selling €6 billion ($6.7 billion) of bonds on Monday, according to a memo from one of the deal's managers, testing investor appetite after doubts about the AI trade triggered a recent selloff in tech stocks and debt.

Alphabet is offering the new bonds in seven tranches, with total demand just over €17 billion, the memo from one of the banks arranging the sale seen by Reuters showed. 

The bonds, expected to be priced later on Monday, have maturities ranging from 2 to 19 years. They include one floating-rate tranche and six fixed-rate tranches, according to an SEC filing.

Previous Bond Sales and Market Context

The offer marks Alphabet's second euro-denominated sale this year. In May, it sold €9 billion of bonds across six tranches, following a rare 100-year sterling bond sale in February.

Concerns about the financing required to support heavy spending on artificial intelligence, and the returns needed to justify that investment, have weighed on technology stocks and bonds in recent weeks. The tech-heavy Nasdaq fell 5% in October.

The latest bout of volatility has been fuelled by disappointing quarterly results from Alphabet and Amazon, two of the biggest spenders on data centres.

Use of Proceeds and Management

Alphabet said it intended to use the net proceeds for general corporate purposes, which may include repaying outstanding debt.

Barclays, BNP Paribas and Deutsche Bank are the joint book-running managers for the offering, according to the SEC filing.

Financial Performance and Capital Expenditure

Alphabet's shares fell more than 12% last Thursday, their worst day ever, wiping out roughly $500 billion in market value after its quarterly results showed slower-than-expected growth in Google Search and cash burn that rattled investors.

For the whole year, the company expects capital spending of as much as $205 billion.

As of September 30, Alphabet had also signed leases, mainly for data centres, that have not yet commenced, with future payments of $130.5 billion that are not yet recorded on its balance sheet, the SEC filing showed.

Comparison with Other Tech Giants

Microsoft, by contrast, was the only Big Tech company generating cash in the quarter.

Still, analysts expect major tech companies to step up bond sales in Europe to fund infrastructure investment, tapping the region's deep and liquid debt markets.

Market Reaction and Bond Performance

Alphabet shares were up about 1% in premarket trading. The company's US-listed shares fell nearly 19% in October, their worst monthly performance on record.

Its dollar-denominated 4.1% bond due in 2031 was little changed on Monday at about 95.43 cents on the dollar.

($1 = 0.8948 euros)

(Reporting by Dhara Ranasinghe, Anzar Mehraj and Yoruk Bahceli; Editing by Amanda Cooper, Mark Potter and Tomasz Janowski)