Alibaba rallies in credit market as dollar bond deal starts
Alibaba Group Holding Ltd. is starting a sale of dollar debt to raise as much as $5 billion, in what could be the biggest dollar bond sale in Asia in eight months.
The Chinese e-commerce giant is marketing a multi-tranche bond offering which is expected to price as early as Thursday, according to a person familiar with the matter. The initial price guidance for the planned 10-year, 20-year, 30-year and 40-year notes is set at around 130 basis points, 140 basis points, 150 basis points and 160 basis points over US Treasuries, said the person who isn’t authorized to speak publicly and asked not to be identified.
Alibaba’s existing dollar notes and its shares rallied on Thursday after the news, on optimism that the deal was going ahead. Spreads on those securities tightened about 10 basis points across the curve, according to credit traders, more than the average 1 basis point on other Chinese investment-grade bonds. The company’s shares in Hong Kong erased earlier losses to trade up as much as 2.5%.
If Alibaba were to raise $5 billion in the offering, that would be the biggest corporate dollar note deal in Asia since a $6 billion issuance by Tencent Holdings Ltd. in May. Alibaba was originally aiming to raise at least $5 billion via a debt sale that could have been increased to $8 billion depending on the reception, Bloomberg reported in early January. Investors had wondered then whether the company could pull off the deal as founder Jack Ma hadn’t been seen in public since his Internet empire was hit with growing antitrust scrutiny.
The company is resuming the debt plans after reporting a 37% increase in quarterly revenue that beat analysts’ expectations, giving it a much-needed boost amid the regulatory crackdown. Beijing in November torpedoed affiliate Ant Group Co.’s record initial public offering and began an investigation into the online retailer, fueling uncertainty over the future of Ma’s tech empire. But the billionaire entrepreneur’s brief return to public view in January signaled that worst-case scenarios may be less likely.
The firm is looking to raise cash partly for general corporate purposes, including working capital needs, repayment of offshore debt, and potential acquisitions of or investments in complementary businesses, according to the person. The 20-year tranche of Alibaba’s new offering will be its first sustainability bond.
The company could not be reached immediately for comment.
Alibaba’s dollar bonds have enjoyed a strong rebound since a selloff in China’s offshore investment grade notes at the beginning of the year. Spreads on the firm’s 3.4% note due 2027 were indicated at about 95 basis points over Treasuries on Wednesday, some 40 basis points tighter than its January high, the latest Bloomberg-compiled data show.
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