Alibaba’s bond sale attracts US$38 billion worth of orders as investors shrug off antitrust fears and look to future of China’s booming e-commerce industry
Alibaba Group Holding’s US$5 billion bond attracted an avalanche of orders from fixed-income investors, peaking at US$38 billion, on growing confidence that the e-commerce behemoth will emerge relatively unscathed from an antitrust investigation.
The scramble to buy the bonds allowed the platform company to sell its new dollar-denominated debt at a more advantageous price than initially expected, according to people familiar with the transaction.
The vote of confidence in Alibaba’s long-term future comes after its founder Jack Ma was summoned by China’s regulators for a dressing down in November and Beijing shelved an initial public offering by its financial affiliate Ant Group at the last minute. China’s antitrust watchdog launched an antitrust probe into the firm’s business practices on December 24.
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The offering by the Hangzhou-based firm is its first foray into international debt markets since 2017 when it sold US$7 billion worth of bonds. The wait for Alibaba to come back to markets created pent up demand among investors, the people familiar said.
Alibaba’s founder Jack Ma. Photo: Reuters alt=Alibaba’s founder Jack Ma. Photo: Reuters
Sovereign wealth funds, pension funds and global asset managers from the US and Europe were among the Who’s Who list of investors who managed to squeeze into the deal. The global investment community looked to other technology giants’ debt, such as bonds issued by Amazon, Google and Tencent, as proxies to calculate their bids.
The longest dated tranche of 40-year debt priced at 130 basis points over US Treasuries, coming in from guidance of 160 basis points, according to terms sheets seen by the Post.
Alibaba is riding the wave of investors hunting for yield as central banks unleash liquidity into capital markets to spur an economic recovery from the coronavirus pandemic. Over the past 12 months, companies have been able to issue longer-dated debt at historically low levels.
Alibaba’s 30-year notes carried a coupon of 3.15 per cent, and its 40-year bonds bear an interest of 3.25 per cent; lower than in 2017, when the company sold a 30-year bond with a coupon of 4.2 per cent and a 40-year bond with interest of 4.4 per cent.
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 stronger-than expected 37 per cent surge in revenue for the quarter ended December, lifted by its extended Singles’ Day campaign last year.
China’s online shopping gross merchandise value will likely expand at a 12 per cent annually until next year and cloud-services by 35 per cent into 2023, according to consultancy iResearch. “Alibaba will be a key beneficiary of the trend due to its market leadership,” said Fitch ratings analyst Kelvin Ho.
When Alibaba released results, it also said that the firm had established a task force to conduct an internal review as part of its efforts to cooperate with an antitrust investigation launched by China’s State Administration of Market Regulation on December 24. The inquiry will look into the company’s business practices, including its exclusivity agreements with merchants.
Ma delivered a video speech to 100 rural Chinese teachers in January, marking his first public appearance in nearly three months after his controversial speech at a Shanghai financial forum on October 24. Although Ma retired from his official positions at Alibaba in 2019, the 56-year-old is still widely regarded as a key figurehead for his business empire and the face of China’s private business community.
Sentiment around the debt sale also received a boost from news on Wednesday that Alibaba’s financial arm, Ant Group, and China’s financial regulators, have agreed a plan to overhaul the planet’s largest financial technology company.
The most liquid of Alibaba’s existing bonds, its 3.4 per cent notes due 2027, were higher at 111.916 in Asian trading. Alibaba’s outstanding debt has, in the most part, traded lower since December.
Alibaba’s New York-listed American depositary shares have also rallied, jumping 27 per cent from the low of US$211 plumbed on December 24.
The proceeds from the debt sale, 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.
The active bookrunners on the deal are Citigroup, Credit Suisse, Morgan Stanley, JP Morgan and China International Capital Corporation. Citigroup is the sustainability bond’s structuring adviser.
Alibaba plans to settle the transaction by February 9.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.
