Alphabet Inc. is selling $5.75 billion of bonds with rock bottom yields, in the largest corporate bond sale dedicated to environmental, social and governance purposes.
The parent company of Google is looking to fund organizations that support Black entrepreneurs, small and medium businesses impacted 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.
It will sell $10 billion in total, with other proceeds to fund generate corporate purposes.Investors had placed as much as $31 billion in orders for the sale as of 11:15 a.m. in New York, according to a person with knowledge of the matter. The company was said to initially target a deal size of around $7 billion, the person said, asking not to be identified since the details are private.
Alphabet (GOOGL) has only borrowed in the U.S. 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 will pay just 25 basis points over Treasuries to borrow for five years, according to the person. Amazon.com Inc. priced a three-year bond with the same spread in June, setting a record-low coupon in the process.
Google has prioritized supporting the Black community, recently announcing a $175 million “economic opportunity package” to invest in Black-led venture capital firms and startups, 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 anti-racism programs for all employees, according to a June blog post.
Like other tech companies, Google has struggled to diversify its staff and top ranks -- just 2.6% of its U.S. leadership is Black, according to its latest diversity report. That’s unchanged from a year ago.
Alphabet is selling the debt in six parts, according to the person with knowledge of the matter. The longest security, a 40-year bond, will yield 1.08 percentage points above Treasuries, after initially discussing between 1.25 and 1.3 percentage points, the person said.
JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley are lead managing the bond sale, the person said. Diverse underwriters like Blaylock Van LLC, 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 this year compared to last as more borrowers raise debt to respond to the humanitarian crisis presented by Covid-19, according to HSBC Holdings Plc.
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’s one of the world’s largest corporate buyers of renewable power.
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