Two of the world's largest technology companies, Amazon.com Inc. and Alphabet Inc., have raised a combined $22.5 billion in the Canadian debt market to fund their artificial intelligence spending, bypassing the traditional process of gauging investor appetite. Market participants now speculate whether Meta Platforms Inc. will follow with its first issue of so-called maple bonds, though the company has given no indication.
Unprecedented Demand for Hyperscaler Debt
The record-breaking bond sales saw fund managers eagerly snap up the offerings. Alphabet issued $8.5 billion in Canadian dollar notes in April, followed by Amazon's $14 billion bond sale in May. Both deals were executed without the standard industry practices of widely publicized roadshows or mandate announcements, which typically allow investors to ask questions, prepare for deals, and receive additional data disclosures.
According to Daniel Child, a portfolio manager at YTM Capital Asset Management, these hyperscalers are so well known that “from a resource point of view, a lot of the information you need to know is there at most organizations, even if you haven’t had the benefit of a specific investor call.” Many asset managers already conduct research on these companies through their global bond desks or equity teams.
Investors Overlook Traditional Marketing
Investors are willing to overlook traditional marketing to gain exposure to a part of the technology sector that is virtually non-existent in the Canadian market. Soami Kohly, a Toronto-based portfolio manager at MFS Investment Management, noted that his firm has research on Alphabet and Amazon from both equity and fixed-income teams, and the investment team has met with management. “The high quality helps,” Kohly said, declining to comment on whether his firm participated in the offerings.
The massive bond sales also forced some fund managers to reshape their portfolios. In April and May, managers sold comparable bonds to make room for the new issuances, leading to wider risk premiums on other corporate debt.
Hyperscalers as Exception, Not Rule
Neil McCabe, vice president of fixed income at Beutel Goodman & Co., emphasized that such practices are exceptional. The Amazon and Alphabet transactions are “somewhat unique,” he said, as they are “some of the largest companies globally, with long-standing AA-rated unsecured funding programs and well-known business models.”
Amazon declined to comment, while Alphabet and Meta did not respond to requests for comment. Market chatter continues to focus on whether Meta will issue its own maple bonds, but the company has given no hints.
