Google parent Alphabet Inc.’s municipal-bond market debut was met by a surge of investor interest.
The tech giant’s first involvement in a prepaid energy deal out of California was announced on Tuesday, and the roughly $1 billion transaction came to market this week, capturing attention as the first deal in the prepaid sector with a major tech company.
Prepaid energy deals are complicated transactions that allow utilities to lock in cheaper prices over long periods of time. They involve a financial middleman that receives bond proceeds in exchange for making regular payments needed to procure the energy for the utility.
Pioneer Community Energy, an electricity provider based in Rocklin, California, is the utility involved, while the Alphabet is acting as financial intermediary. The bonds were issued by the California Community Choice Financing Authority and underwritten by Goldman Sachs Group Inc.
Investors couldn’t get enough of the sale. The largest slug of bonds priced at a spread of 95 basis points above the benchmark, but the bonds subsequently traded at tighter spreads in the secondary market, a sign of strong demand, Bloomberg data showed Friday.
The 2035 maturity saw especially strong interest on Friday, with trades on that CUSIP amounting to $492 million as of the afternoon. Those bonds traded at an average spread of 89 basis points, with some trades as low as 74 basis points.
Don Eckert, chief executive officer of Pioneer, said the deal received a “very favorable response” due to the Google parent company entering the market for the first time.
“The savings on prepaying renewable electricity from this transaction will flow to Pioneer’s ratepayers and support utility affordability for the communities we serve,” he said in a statement.
A representative for Goldman declined to comment. A representative for Google did not immediately respond to requests for comment.
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