Alphabet Inc. $10b 6-part Debt Issuance Makes GOOG the Top Issuer of the Day
Below is excerpted from Aug 03 2020 edition of Quigley’s Corner, Mischler Financial Group’s daily debt market coverage and commentary distributed to Fortune 500 treasury teams, leading institutional investors, and the sell-side’s most recognized fixed income syndicate desks.
Today the IG Corporate dollar DCM hosted 10 issuers across 19 tranches totaling $17.933b. The SSA space was inactive. Althouhh 19 issuers announced and priced deals today the Big Kahuna was Alphabet Inc. from the onset. Their transaction represented 56% of today’s volume. Diversity-certified investment bank Mischler Financial Group, Inc., our nation’s oldest Service Disabled Veteran broker-dealer was named as an Active Co-Manager……and man oh man were we active. Naturally, that makes Alphabet’s transaction today’s Deal-of-the-Day!
Alphabet Inc. $10b 6-Part Senior Notes Including $5.75b of Sustainable Tranches: Deal Dashboard
Of today’s “GOOGL” 6 tranches 3 were designated “Sustainable” issuances totaling $5.75b. When the IG dollar DCM hosts Alphabet the world sees it. They are all taking notice as to what the mega-cap companies/issuers are doing. This furthers the ESG narrative which I’ve extolling here for a loooong time. We’ve seen major inroads when Mizuho led the Japanese bank space to its first D&I transaction on Monday, July 6th. Just last Monday, July 27th AT&T issued an $11b Diversity transaction featuring 14 diverse broker-dealers. Today Alphabet joined the fray with a landmark transaction that also featured a total of 16 diverse certified broker-dealers. Serving alongside Mischler Financial Group, Inc., was b/ds representing the African-American, Hispanic-American and Woman-owned spaces. Kudos to Alphabet Diversity and Inclusion as well as Treasury/Funding and Capital Markets for the leadership role they not only own in the TMT sector but also in sustainability or ESG initiatives in our IG dollar DCM.
About The Google Veteran’s Network
Alphabet’s subsidiary ‘Google Veterans Network’ mission is to conduct operations around the world to attract, recruit and retain top veteran talent to Google, provide a Googler support and learning network and help solve challenges in the veterans community with Google products. It is an employee resource group and volunteer community that strives to make Google a great place to work for employees who have served, as well as their families, friends and supports. It also supports the active duty and military veteran community outside of Google through a wide range of transition-related programs and partnerships.
A Look at Alphabet Inc’s. 6 year Intersectional Headcount Growth Rate
When a company places 16 diversity firms on its high profile transaction it is a verification and endorsement of the company’s commitment to continuing to make diversity, equity, and inclusion part of everything they do. Today Alphabet made great inroads as a leader of Corporate D&I procurement mandates. From how they build their products to how they build their workforce and price the multi-billion dollar financings in our financial services industry. Alphabet grew leaps and bounds to fulfill that vision today. It well matches the Company’s doubling its size in the past few years in 170 cities spanning 60 countries. Operating at that scale brings an elevated level of responsibility to everything they do – including a workforce that’s more representative of its global users and a workplace that creates a sense of belonging for everyone. It was a privilege and a great pleasure being selected to be a value-added part of Alphabet’s socially responsible journey today.
Deep Dive into Just What Eligible Green Projects Are:
Use of proceeds from today’s transaction will be used for general corporate purposes which may include the repayment of outstanding debt. Sustainable tranches totaled $5.75b across 5s, 10s and 30s will use proceeds to finance or refinance, in whole or in part, new or existing Eligible Projects, as defined in the preliminary prospectus supplement as follows:
Eligible Projects are investments and expenditures made by GOOGL or any subsidiaries beginning with the issuance date of the Sustainability Notes, or in the 24 months prior to the issuance of the Sustainability Notes, in eligible Green Projects and/or eligible Social Projects as defined in and aligned with the four core components of both the Green Bond Principles, 2018 and Social Bond Principles, 2020, collectively known as “The Principles,” which recommend transparency and disclosure and promote integrity with respect to “sustainable” bonds, and in accordance with the Sustainability Bond Guidelines, 2018, (the “SBG”) all of which are administered by the International Capital Markets Association. We expect that each of our Eligible Projects will meet one or more of the following eligibility criteria, but any Eligible Projects receiving an allocation of the net proceeds from the sale of the Sustainability Notes may or may not include any one or all of the example projects listed below:
Energy Efficiency: Expenditures related to design, construction, operation, and maintenance of energy-efficient facilities and infrastructure. Examples of projects under this category may include but are not limited to:
– Data centers that are expected to achieve Power Usage Effectiveness (PUE) of less than 1.5
Clean Energy: Expenditures related to the construction, development, acquisition, maintenance, and operation of renewable energy projects that are new to the grid, such as solar, wind, small-scale hydropower generation, geothermal, and biomass. Examples of projects under this category may include but are not limited to:
– Power purchase agreements (PPAs) that meet our criteria of additionality
– On-site renewable energy projects and storage installations
– Equity investments in renewable energy projects
Green Buildings: Expenditures related to design, construction, and improvements of office spaces and surrounding communities. Examples of projects under this category may include but are not limited to:
– Offices that are owned or leased for longer than 10 years and are expected to achieve a third-party certification such as Leadership in Energy and Environmental Design (LEED) Gold or higher, or Living Building Challenge
Clean Transportation: Expenditures related to the procurement, maintenance, and operation of electric vehicles (EV), bicycles and associated infrastructure. Examples of projects under this category may include but are not limited to:
– Procurement of EVs
– Installation of EV charging stations
– Procurement of bicycles and operation of EV bike and shared bike programs
Circular Economy and Design: Expenditures related to projects that are designed to increase waste diversion from landfill and design out waste. Examples of projects under this category may include but are not limited to:
– Increasing use of recycled or reused materials, such as post-consumer recycled (PCR) plastic in consumer hardware devices
Affordable Housing: Expenditures related to the construction, development, acquisition, and maintenance of affordable housing. Examples of projects under this category may include but are not limited to:
– Rezoning of Alphabet-owned land to facilitate residential development to address chronic housing shortage
– Funding supporting the development of affordable housing units
Commitment to Racial Equity: Expenditures focused on advancing economic opportunity and equity for under-represented communities, including the Black+ community. Examples of projects under this category may include but are not limited to:
– Financing for small and medium businesses (“SMBs”) serving the Black community
– Funding participation in Black-led capital firms, startups, and organizations supporting Black entrepreneurs
– YouTube Black Creators fund dedicated to amplifying and developing the voices and stories of Black artists
Support for Small Businesses and COVID-19 Crisis Response: Expenditures related to support for SMBs, including those impacted by COVID-19. Examples of projects under this category may include but are not limited to:
– Loans to capitalize NGOs and financial institutions that provide SMBs access to capital
– Training to help small business owners grow their skills.
I am going to re-run this last paragraph as it is a critically important excerpt from a widely read and influential article:
“What has become clear over the past three months is that a host of ‘stakeholders’ including many investors, will expect a sea-change in their access to information and company practices. While there is no requirement to be the first mover on this, those that are laggards will face avoidable challenges and a rising threat to their ‘license to operate.” That is the last paragraph of a widely read article titled “Time to rethink the ‘S’ in ESG – COVID-10 prompts increased focus on a new ‘S’: the Stakeholder” as published by FTI Consulting Inc. published on May 29th, 2020. The article that marries very well with what I have been saying and writing about here in the “QC” these past few years especially regarding my forecast for DCM trends in late December of 2019 that called for more issuance under the “S” for ESG.
The overall Alphabet Inc. order books were a cumulative $34.3b making today’s $10bn financing a very strong 3.40-times oversubscribed.
Here’s a look at the final book splits and bid-to-cover rates:
|Tranche Size||Final Order Books||Bid-to-Cover
……and here’s a check of spread compression from IPTs thru the launch and final pricing as well as new issue concession or NIC.
|5yr||Aa2/AA+||+40a||+25 #||+25||+25||15 bps||5|
|7yr||Aa2/AA+||+55a||+45 #||+45||+45||10 bps||5|
|10yr||Aa2/AA+||+75a||+60a (+/-2)||+58||+58||17 bps||3|
|20yr||Aa2/AA+||+90-95/+92.5a||+75a (+/-2)||+73||+73||19.5 bps||<2>|
|30yr||Aa2/AA+||+105-110/+107.5a||+90a (+/-2)||+88||+88||19.5 bps||<2>|
|40yr||Aa2/AA+||+125-130/+127.5a||+110a (+/-2)||+108||+108||19.5 bps||<2>|
Alphabet Inc. Final Pricing Details:
GOOGL $1bn 0.45% due 8/15/2025 @ $99.901 to yield 0.470% or T+25
GOOGL $1bn 0.80% due 8/15/2027 @ $99.660 to yield 0.850% or T+45
GOOGL $2.25bn 1.10% due 8/15/2030 @ $99.726 to yield 1.129% or T+58
GOOGL $1.25bn 1.90% due 8/15/2040 @ $99.371 to yield 1.938% or T+73
GOOGL $2.50bn 2.05% due 8/15/2050 @ $99.155 to yield 2.088% or T+88
GOOGL $2bn 2.25% due 8/15/2060 @ $99.007 to yield 2.288% or T+108
Thank you to Alphabet’s Treasury/Funding Team as well as the formidable job done today by J.P. Morgan Syndicate who liaised with every one of the 16 diverse C0-Managers today.
Above is the opening extract from Quigley’s Corner aka “QC” 08-03-2020 edition distributed via email to institutional investment managers, lead underwriter syndicate desks and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest diversity-certified broker-dealer owned and operated by Service-Disabled Veterans.
The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of Mischler’s primary debt capital markets desk. Commentary includes a comprehensive “deep dive” with optics on the day’s investment-grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment-grade credit spreads, new issue activity, secondary market most active issues, and upcoming deal pipeline.To receive Quigley’s Corner, please email: email@example.com or via phone 203.276.6646
Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones Newswire, IFR, Informa Global Markets, Internal Mischler, ITC Markets, Market News International, Prospect News, Stone & McCarthy Research, Refinitiv, Thomson Reuters and of course, a career of sources, contacts, movers and shakers from syndicate desks to accounts; from issuers to originators; from academicians to heads of research, and a host of financial journalists, et al.