Alphabet has lined up banks to sell a rare 100-year bond, stepping up a borrowing spree by Big Tech companies racing to fund their vast investments in AI this year. The so-called century bond will form part of a debut sterling issuance this week by Google’s parent company, said people familiar with the matter. Alphabet was also selling $20 billion of dollar bonds on Monday and lining up a Swiss franc bond sale, the people said. The dollar portion of the deal was upsized from $15 billion because of strong demand, they added. Century bonds—long-term borrowing at its most extreme—are highly unusual, although a flurry was sold during the period of very low interest rates that followed the financial crisis, including by governments such as Austria and Argentina. The University of Oxford, EDF, and the Wellcome Trust—the most recent in 2018—are the only issuers to have tapped the sterling century market. Such sales are even rarer in the tech sector, with most of the industry’s biggest groups issuing up to 40 years, although IBM sold a 100-year bond in 1996. A banker familiar with Alphabet’s transaction said the company’s multi-currency bond offering is an effort to expand the investor pool given the massive amount of capital needed by Big Tech companies. “There might be a supply-demand imbalance if you were to try to come back to the US dollar market over and over again,” the banker said. Issuing a century bond in the sterling market is more cost-effective than in the dollar market, where the interest rate is higher, the banker added. While a century bond is “highly unusual” for tech companies, it could appeal to buyers such as life insurance companies and pension funds, which have a mandate to buy long-term assets, said Nicholas Elfner, co-head of research at Breckinridge Capital Advisors.
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