By Danielle Robinson
NEW YORK, Feb 20 (IFR) - Google was deluged with orders
Thursday for its new US$1bn 10-year bond, with demand said to
have surged to around US$5bn by midday for the Internet giant's
second-ever debt offering.
That surge of interest allowed the double-A rated company to
shave a full 10bp off initial price thoughts, releasing official
price guidance at T+65bp area (+/- 2.5bp) after whispering in
the T+75bp region.
That's already on top of where triple-A rated Microsoft
trades on a spread basis over Treasuries in similar maturities.
One trader told IFR that the much tighter price guidance
level had caused "a decent amount" of investors to drop out of
the order book.
"This is a rare issuer with broad name recognition that
everyone has room for in the portfolio," said Matt Duch, senior
portfolio manager at Calvert Investments.
"The question is how tight does it price? That's the thing
Lead managers Bank of America Merrill Lynch, Goldman Sachs
and Morgan Stanley have indicated that the transaction will not
grow in size beyond US$1bn.
Google will use proceeds for the repayment of its
outstanding US$1bn 1.25% 2014s, which were one of three tranches
in its first-ever debt sale in May 2011.
Comparables for the new deal include another tranche, its
3.625% May 2021s, which are currently seen at G+49bp and a
dollar price of US$106.00.
Microsoft, rated higher at triple-A, has a 3.625% December
2023 trading at T+65bp, the same as Google's guidance level.
But Google's deal looks even richer at guidance of T+65bp
when compared to the G-spread of the Microsoft's 2023s.
Other comparables include IBM, rated Aa3/AA-, which has
3.625% February 2024s at G+90bp.
The Google offering leads an onslaught of corporate deals in
the US bond market on Thursday, with Eli Lilly, Whirlpool and
Medtronic all out with fresh supply.