Picture: REUTERS
Picture: REUTERS

New York — Alphabet, the parent company of Google, is receiving strong demand for new bonds with rock-bottom yields, in a rare debt sale that will help combat racial inequality, among other sustainability projects.

The company is looking to fund organisations that support black entrepreneurs, small and medium businesses affected by Covid-19, as well as affordable housing, among other eligible proceeds listed in bond documents seen by Bloomberg. The borrowings can also be used to finance clean energy projects and green buildings.

Investors have already placed as much as $31bn in orders for the sale, according to a person with knowledge of the matter. The company is said to be targeting a deal size of about $7bn, subject to change, the person said, asking not to be identified since the details are private.

Alphabet has only borrowed in the US investment-grade market a handful of times, with the last issue four years ago. It was cheap to sell bonds then, and could be even more of a steal now — the company may pay just 40 basis points over treasuries to borrow for five years, according to the person.

Amazon.com initially marketed a similar range for a debt offering in June, which ended up pricing at a spread of 25 basis points, setting a record-low coupon in the process.

Google has prioritised supporting the black community, recently announcing a $175m “economic opportunity package” to invest in black-led venture capital firms and start-ups, training for black job seekers and grants for small businesses. It also said it will hire more black workers in senior roles and establish internal antiracism programmes for all employees, according to a June blog post.

Alphabet may sell the debt in six parts, according to the person with knowledge of the matter. The longest security, a 40-year bond, may yield between 1.25 and 1.3 percentage points above treasuries, the person said.

JPMorgan Chase, Goldman Sachs Group and Morgan Stanley are lead managing the bond sale, the person said. Diverse underwriters such as Blaylock Van,  a minority-owned investment bank, and Drexel Hamilton, which is owned and operated by serviced disabled veterans, are among the deal’s co-managers.

The bond sale comes as sustainable debt issuance has skyrocketed in the pandemic, most notably via social bond sales. Supply will almost double in 2020 compared to 2019 as more borrowers raise debt to respond to the humanitarian crisis presented by Covid-19, according to HSBC Holdings. 

In addition to the sustainability-linked proceeds, the bond sale will also support green projects. Google has been expanding its use of sustainable energy, touting its carbon-neutral status for over a decade. It is one of the world’s largest corporate buyers of renewable power.

Bloomberg

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