Alibaba guides market on US$5 billion debt sale ahead of pricing on Thursday

Alison Tudor-Ackroyd
·3-min read

Alibaba Group Holding has released guidance to investors on its dollar bond sale of up to US$5 billion ahead of pricing later on Thursday.

The offering by the Hangzhou-based e-commerce behemoth is its first foray into international debt markets since 2017 when it sold US$7 billion worth of bonds.

The initial price guidance on the planned 10-year tranche was around 130 basis points over US Treasuries; for the 20-year bonds, in the area of 140 basis points; for the 30-year, about 150 basis points; and for the 40-year debt, about 160 basis points, according to a terms sheet seen by the Post.

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Alibaba, which owns this newspaper, will fix the exact size of the offering and the bonds’ interest rates after discussing terms with fixed-income investors. It kicked off marketing calls on Wednesday, people familiar said.

Ratings agency Moody’s labelled the notes as investment grade “A1 Stable” while S&P and Fitch both said they were “A+ Stable”.

The bond sale comes after Alibaba reported a 37 per cent surge in revenue for the quarter ended December, lifted by its extended Singles’ Day campaign last year and handily beating analysts’ estimates. Companies tend to tap capital markets after releasing fresh financial statements.

Sentiment around its debt sale also received a boost after news on Wednesday that its financial arm, Ant Group, and China’s financial regulators, have agreed a plan to overhaul the planet’s largest financial technology company.

Alibaba’s existing 3.4 per cent notes due 2027 were higher at 111.214 in Asian trading. Alibaba’s outstanding debt has, in the most part, traded lower since December.

China’s antitrust watchdog, the State Administration of Market Regulation (SAMR), launched an investigation on December 24 into the company founded by entrepreneur Jack Ma. The inquiry will look into the company’s business practices, including its exclusivity agreements.

The proceeds from the proposed senior unsecured notes, excluding the sustainability notes, will be used for general corporate purposes, including working-capital needs, repayment of offshore debt and potential acquisitions of or investments in complementary businesses.

Alibaba will use the proceeds from the sustainability notes to finance projects such as encouraging the recycling of packaging at its logistics arm, Cainiao, and renewable energy to fuel its data centres.

Alibaba previously issued US$8 billion of bonds to investors in 2014, pricing a US$700 million 20-year bond at 4.5 per cent due 2034.

In 2017, it sold US$7 billion worth of debt, including a US$1 billion 40-year bond maturing in 2057 at 4.4 per cent.

The active bookrunners on the deal are Citigroup, Credit Suisse, Morgan Stanley, JP Morgan and China International Capital Corporation.

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