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

Google parent Alphabet GOOGL-Q is selling €6-billion (US$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.

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.

Brutal AI selloff stirs recession fears

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 per cent in October.

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

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.

Alphabet’s shares fell more than 12 per cent last Thursday, their worst day ever, wiping out roughly US$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 US$205-billion.

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

Microsoft MSFT-Q, 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.

Alphabet shares were up about 1 per cent in premarket trading. The company’s U.S.-listed shares fell nearly 19 per cent in October, their worst monthly performance on record.

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