Alibaba Turns to Bond Markets for $8B

The proceeds will be used to refinance existing debt facilities, the Chinese e-commerce giant said.
Matthew HellerNovember 13, 2014
Alibaba Turns to Bond Markets for $8B

Collecting $25 billion from its blockbuster IPO apparently wasn’t enough for Alibaba. Just two months after the largest stock debut in history, the Chinese e-commerce behemoth announced Thursday it was planning its first bond sale.

In a regulatory filing, Alibaba said the principal amount, interest rates, maturity dates and other terms of the U.S. dollar-denominated notes would be determined at the time of pricing of the offering. But sources told Bloomberg that the company is seeking to raise as much as $8 billion.

The proceeds will be used primarily to refinance Alibaba’s existing credit facilities. Alibaba, with a market capitalization of almost $300 billion, has $11 billion in loans and credit lines, according to data compiled by Bloomberg. A $4 billion term loan that the company obtained last year pays 275 basis points over the London interbank offered rate.

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After the debt offering was announced, Standard & Poor’s and Fitch Ratings rated the notes at investment grade “A-plus,” while Moody’s Investor Service assigned an equivalent “A1” rating.

“The ratings reflect Alibaba’s dominant position in China’s online shopping market,” Fitch explained. “The ratings also benefit from Alibaba’s robust profitability and strong cash generation.”

Alibaba stock has gained about 70% since the IPO, but it fell about 2% to $115.92 in trading Thursday.

Morgan Stanley, Citigroup, Deutsche Bank and JPMorgan Chase will market the debt to investors starting next week, Bloomberg reports.

In its assessment of the offering, the Financial Times reports, S&P downplayed concerns over Alibaba’s governance, saying the influence of major shareholders Yahoo and Softbank should offset the control the company’s partnership structure gives a small group of executives.

“Alibaba is a public company under close public scrutiny with better transparency now,” analyst Tony Tang said. “The company’s board composition has evolved since the public listing, and future governance actions — rather than past actions — are likely to be key credit factors in our analysis.”