Alphabet Eyes Aussie Dollar Bond Issue Amid AI Funding Squeeze

Alphabet is considering issuing its first Australian dollar-denominated bonds in a move to diversify its funding sources. The US tech giant has mandated investment banks, including ANZ, Deutsche Bank, RBC Capital Markets, and TD Securities, to work on the bond issue.

The company plans to offer 3-, 5-, 10-, and 20-year bonds with fixed or floating rates. However, the message did not outline how much Alphabet could raise in the transaction or its plans for the proceeds.

This move comes as global tech companies are increasingly looking to capital markets to fund their massive AI spending. They have traditionally relied on large cash reserves to fund investments but are now turning to debt financing due to squeezed cash flows. Alphabet reported its first negative free cash flow in its second-quarter report in late July, with the company expected to spend more than $730 billion this year primarily on AI.

Local currency bonds are becoming increasingly popular among some of the world's biggest issuers as they look to diversify their reliance on dollar bond transactions. 'Kangaroo' bond sales from foreign issuers in Australian dollars are at a record high of around A$60 billion ($42 billion) so far this year, up roughly 40% from 2022.