Google's bond offering a hot buy

The search giant plans its first-ever bond offering for later this afternoon, and demand is riding high.

By Kim Peterson May 16, 2011 2:40PM
One of the hottest investments of the day is Google's (GOOG) first-ever bond offering. People are expected to go crazy over the $3 billion offering, slated to be sold this afternoon.

The funny thing is that the bonds aren't exactly paying well; there are definitely better ways to make money. But this is Google we're talking about, and that's enough to get investors plenty worked up.

"People aren't going to do very much credit analysis, they're going to look at the balance sheet, and look at the cash, and say 'This is ridiculous' and put their orders in, and probably big orders," one money manager told Bloomberg. "It will be scooped up like nobody’s business."

Google had about $35 billion in cash at the end of last year and has never tapped the corporate bond market. But it's so cheap to borrow now, so why not. Google will use the $3 billion sale on general corporate uses and to pay back short-term debt.

There's an "insatiable appetite for corporate debt" among investors, The Wall Street Journal notes. The deal will sell three $1 billion portions in three-year, five-year and 10-year notes.

The three-year notes will likely yield 0.33 percentage point more than Treasuries of similar maturity. The spread will be 0.43 percentage point on a five-year note and 0.58 percentage point on a 10-year piece.

"All three pieces were launched narrower than preliminary pricing guidance had suggested, indicating good demand from investors," the Journal reports. Orders will likely hit $10 billion, one source told the Journal. Google could have easily doubled its offering, but decided against it.

The bonds are expected to be sold later today by Citigroup (C), JPMorgan Chase (JPM) and Goldman Sachs (GS).


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