Alphabet to Raise €6 Billion in Euro Bonds at Higher Premium to Attract Buyers

Alphabet is set to raise €6 billion in its second euro bond sale this year, offering investors a higher premium than in May as concerns over AI spending have contributed to a credit-market selloff. According to Sina Finance, people familiar with the matter said the Google parent was close to completing a seven-tranche deal with maturities ranging from two to 19 years. Investor orders exceeded €17.1 billion, with demand concentrated in the longest-dated tranche. Spreads on all the tranches are expected to be wider than in May. During bookbuilding, pricing on each tranche tightened by at least 20 basis points. The two-year fixed-rate bond is expected to price 40 basis points above mid-swaps, while the 19-year bond is expected to price 185 basis points above mid-swaps. The fixed-rate bonds carry an average new-issue premium of nearly 24 basis points, about three times this year's euro corporate bond market average, according to compiled data. Including the €9 billion Alphabet raised in a six-tranche euro bond sale in May, the new deal would make the company the largest euro corporate bond issuer in a single calendar year. Amazon currently holds the record after raising €14.5 billion in March. Alphabet's existing euro bonds have seen spreads widen by as much as 0.6 percentage points since trading began. Jack Daley, a portfolio manager at TwentyFour Asset Management, said bond investors may look past performance and focus on Alphabet's strong balance sheet. Moody's rates the company's existing euro bonds Aa2, its third-highest investment-grade rating. Daley said Alphabet remained a strong credit issuer and described the pricing as attractive, adding that initial pricing was at BBB bond levels even though the company is rated AA. Alphabet's report last week showed the stakes in its AI infrastructure spending; disappointing search and advertising sales coincided with a record decline in its market value. Barclays, BNP Paribas and Deutsche Bank are arranging Monday's offering, which is expected to be priced later that day.