Google Enters Bond Market With $3 Billion Sale

Posted May 16, 2011

Google Inc. (NASDAQ:GOOG) has entered the bond market through a $3 billion sale in order to pay back short-term borrowings at yields that are comparable to companies with high credit grades. Thornburg Investment Management Inc. money manager Lon Erickson said that the bond sale was “a home run for Google.” He added ?The big pile of cash on the balance sheet and continued cash generation makes people plenty comfortable to own that debt.?

At the year-end Google had total cash and marketable securities worth $35 billion according to a filing. Google CEO Larry Page is ramping up the company spending as they prepare to expand mobile and video ads. The bond sale was split into even three-, five-, and 10-year notes. The 1.25% three-year notes yield 33 basis points more than maturity notes that are similar to the Treasury. The 2.125% five-year debt pays a 43 basis-point spread. And the 3.625% 10-year securities offer 58 basis points.

Google was graded Aa2 by Moody’s Investors Service and AA- by Standard & Poor’s. The debt market had priced Google’s debt at the same level of AAA rated companies that pay an average spread of 59 basis points. The bond offering will give Google more flexibility to spend cash in the U.S. ?We plan to use the proceeds to repay outstanding commercial paper and for general corporate purposes,? stated Google spokesman Aaron Zamost.