Alphabet Plans Historic 100-Year Bond Issuance in Sterling Market
Alphabet Inc., the parent company of Google, is preparing to launch a groundbreaking 100-year bond as part of a significant multi-currency debt offering. This marks the first time a technology corporation has issued such long-dated debt since the late 1990s dot-com era, representing a notable shift in corporate financing strategies within the tech sector.
Details of the Sterling Bond Offering
The century bond will be denominated in British sterling alongside four additional tranches in the same currency, according to sources familiar with the transaction. This represents Alphabet's inaugural venture into the sterling bond market, with pricing potentially occurring as early as tomorrow. The company's previous U.S. dollar bond issuance in November attracted substantial investor interest, raising US$17.5 billion against approximately US$90 billion in orders.
Historical Context and Market Rarity
This issuance represents the first technology company century bond since Motorola's similar offering in 1997, based on Bloomberg-compiled data. The market for 100-year bonds has traditionally been dominated by government entities and institutional organizations like universities, with corporate issuances remaining exceptionally rare due to several factors:
- Potential acquisition scenarios that could alter corporate structures
- Business model evolution and potential obsolescence
- Technological disruption risks inherent to the sector
- Interest rate sensitivity concerns for ultra-long duration instruments
Investor Demand and Market Dynamics
Gordon Kerr, European macro strategist at KBRA, explained the strategic rationale behind such long-dated issuances: "They want to tap every kind of investor possible from the structured finance investor to the super long-dated investor." Primary buyers for these century bonds typically include insurance companies and pension funds seeking matching assets for their long-term liabilities.
The sterling market has become particularly attractive for issuers seeking extended funding durations due to strong demand from United Kingdom pension funds and insurers. However, the corporate century bond market remains exceptionally selective, with only three previous sterling issuers in this category: Electricite de France SA, the University of Oxford, and the charitable foundation Wellcome Trust Ltd, all in 2021.
Performance Considerations and Historical Precedents
Previous century bond issuances have demonstrated significant price volatility due to their extreme duration sensitivity to interest rate changes. The Wellcome Trust bond, featuring the lowest coupon among recent issuers, currently trades at approximately 44.6 pence on the pound, illustrating how these instruments can trade well below face value when market conditions shift.
Not all century bonds reach maturity, as demonstrated by troubled retailer J.C. Penney Co., which filed for bankruptcy in 2020—just 23 years after issuing its own 100-year bond in 1997.
Broader Financing Strategy and AI Investment Drive
Alphabet's century bond initiative forms part of a comprehensive multi-tranche debt offering that includes a seven-part U.S. dollar transaction expected to price imminently. The company is also planning its debut issuance in Swiss francs, according to additional sources familiar with the matter.
The resurgence of ultra-long corporate debt reflects the substantial capital requirements technology firms face as they compete in the artificial intelligence development race. Despite the inherent risks associated with century bonds, the massive investment needs for AI infrastructure and capabilities are driving even traditionally conservative financing approaches.
As Kerr noted regarding the practical realities of such long-dated instruments, "the guy who underwrites it is probably not going to be the guy who's there when it gets repaid," highlighting the extraordinary time horizon these financial instruments represent in the fast-moving technology sector.
