The tech giant on Tuesday issued an extremely rare corporate bond that matures 100 years from now, part of a multibillion-dollar borrowing spree the company is undertaking to fuel its AI ambitions.
Now, let’s just underline that for a second: Google, a nearly $4 trillion public company with more than $73 billion in free cash flow annually, is turning to debt markets to raise even more money. That’s because even Google’s $126 billion cash on hand starts to look pretty paltry when the company says it plans to double its AI spending this year – to a staggering $185 billion.
[...]
Companies don’t typically launch such extremely long-dated bonds because companies don’t tend to last forever. People also don’t tend to live that long or enjoy it much if they do. If you’re a regular investor buying a Google century bond today, you’re not going to be around to see it mature, let alone do much with it. You can’t take it with you, after all.
[...]
There is a market for these hundo bonds, but it’s not huge. They really only make sense for high-level institutional investors, like life insurance companies and pension funds that have long-term liabilities to cover.
So far, at least, it seems the market is more than willing to extend Alphabet some credit. And by some credit, I mean a boatload: The company raised nearly $32 billion in less than 24 hours, according to Bloomberg, which first reported the 100-year bond offering. Alphabet sold British pound- and Swiss franc-denominated debt Tuesday, following a $20 billion debt sale in the US the day before. The 100-year bond was nearly 10 times “oversubscribed,” meaning investor demand far outstripped supply.
So while the hundo bond is an unusual offering with some ominous historical precedents (particularly in tech), there’s clearly some hunger for it.