Google’s parent company Alphabet has tapped another major Australian export: capital, raising A$5.5 billion through its first Australian-dollar bond issue.
And locals couldn’t get enough of the US tech giant’s ‘Kangaroo’ bonds, which mature in 3, 5, 10 and 20 years, with the yield at 6.98% if you have two decades of patience, or 5.24% at 3 years. Astonishingly, orders were around 4x of the end borrowing at $20bn+. That alone suggests there’s plenty of capital washing around in Australia at the right price and perceived risk.
As eye-watering as $5.5bn seems (it’s roughly the entire Australian startups capital committed in a good year), it’s loose change in Alphabet’s planned capex of US$195-205 billion (A$274-288bn) this year, mostly for servers, chips, data centres and other AI infrastructure. And Australia is just the latest cash mine, after recent bond issuances in British pounds, Swiss francs, Canadian dollars, Japanese yen and euros.
Nor is it a new idea. Apple raised A$2.25bn in August 2015 as ‘Kangaroo bonds’ – just a few hundred mill shy of what Mike Cannon-Brookes was worth a few months later when Atlassian listed on the Nasdaq in December that year. And Alphabet’s Aussie raise doesn’t even cover its first negative quarterly free cash flow, of US$5.9 billion (A$8.3bn), in the June quarter.
Alphabet raised US$25bn through US-dollar bonds earlier this month.
Betashares head of fixed income Chamath De Silva believes the pricing “offered investors compelling value” and the level of demand is a powerful signal to global tech looking for cash.
“Alphabet is one of the highest-quality corporate credits in the world, yet investors were able to buy the bonds at a concession to the company’s existing debt in other currencies when swapped back into Australian dollars,” he said.
“Our expectation is that Amazon is the next cab off the rank for the Kangaroo market. Alongside Alphabet, it’s one of the few hyperscalers that has actively diversified its funding program beyond the US dollar this year, making Australia a logical next step.”
