Technology surpasses telecom for the first time

Outstanding bond debt of the US technology sector has grown to $717.1bn in 2017 from $197.8bn at the end of 2010— by far the fastest debt increase of any sector for US corporate bonds. This year for the first time, technology’s debt surpassed telecom, which registered $689.1bn of outstanding bonds. The sector’s growth has been sustained by a long period of low interest rates, used by technology companies to buy back their shares (playing a prominent role in this market); fund acquisitions (e.g., LinkedIn,WhatsApp, MICROS Systems, and Beats Electronics,among others); and finance new products and market expansion. Utility & energy continues to be the most indebted sector in the US with $806.9bn, a lead held during the past 7 years even as technology companies rapidly gain ground.

Large deals push technology volume to the top

As Q2 enters its last month in 2017, technology leads bond sales with a YTD total of $94.4bn in new issuances, followed by healthcare and telecom with $53.3bn and $43.7bn, respectively. So far this year, there have been four technology bonds worth more than $10.0bn — $13.6bn from Broadcom, $17.0bn from Microsoft (linked to the acquisition of LinkedIn last year), $10.0bn from Apple (issued ahead of Trump’s plans for a tax holiday), and $11.0bn from Qualcomm. In comparison, telecom saw two deals over $10.0bn while other sectors had none issued in 2017 YTD.

Maturing technology and telecom debt

A number of noticeable technology deals are coming due in 2017. A $3.0bn IBM issuance is due September 14 and $3.0bn of Intel notes will mature in December. Significant telecom deals are also maturing this year, including $3.3bn of Verizon notes due June 9 and the $1.5bn AT&T issuance due December 1. For total debt due between 2017 and 2020, there is a gap between the two sectors — with the technology total reaching $234.2bn, whereas the total due for telecom is $177.1bn. As the technology sector continues to be spurred by galloping innovation, it may continue to outpace other sectors and rise in the ranks for outstanding bond debt.

Data source: Dealogic, as of May 30, 2017