Alibaba’s US$7b bond sale attracts US$46b
Alibaba earlier in November bought a slice of China’s largest hypermart chain Sun Art Retail Group Ltd for US$2.9 bil

ALIBABA Group Holding Ltd sold US$7 bil (RM28.7 bil) bonds on Nov 29 in a deal that investors clamoured for, ordering more than six times as many securities as were for sale.

The deal eclipsed China Evergrande Group’s US$6.6 bil offering in June to become the biggest sale in Asia from a non-bank issuer, according to data compiled by Bloomberg. Eager investors were already flipping the bonds in the aftermarket late Nov 29 in New York.

The offering’s 4.2% 30-year bond rose to 101.2 cents on the US dollar at 6.13 pm, up from an issue price of 99.8 cents.

“The market is screaming out for some high-quality issuers right now” such as Alibaba, Hayden Briscoe, head of Asia-Pacific fixed income at UBS Asset Management in Hong Kong, said before the bond sale was concluded at the end of US trading on Nov 29.

The Chinese e-commerce giant sold the notes in five parts, with maturities of 5.5, 10, 20, 30 and 40 years. Investors’ orders on the deal reached US$46 bil, according to people familiar with the offering who are not authorised to speak publicly and asked not to be identified.


Record maturity

The longest portion of the offering, US$1 bil of 4.4% 40-year bonds, yields 1.58 percentage point over comparable government debt. That’s down from early talk from underwriters of around 1.8%.

It’s the longest maturity on record from a Chinese corporate issuer, according to data compiled by Bloomberg.

“Alibaba can afford to pay a bit more for longer-dated funding,” Anthony Leung, director of Asia-Pacific credit research at Wells Fargo Securities LLC in Hong Kong, said before the final pricing of the deal.

Founded by billionaire Jack Ma, China’s second-biggest company by market value raised US$8 bil in its first bond sale in 2014 which remains the largest US dollar-denominated issue by any firm in Asia outside of Japan. It exchanged the notes for new debentures in 2015.

Morgan Stanley, Citigroup Inc, Credit Suisse Group AG, Goldman Sachs Group Inc and JP Morgan Chase & Co managed the sale.

Issuers from Asia outside of Japan have already sold more than US$293 bil in US dollar notes so far this year – an all-time high – compared with about US$186 bil for all of last year, according to data compiled by Bloomberg.

Alibaba had US$1.3 bil of bonds due on Nov 28, Bloomberg data show. It obtained a US$5.15 bil five-year revolving credit facility in April.

The spread on the Hangzhou-based firm’s US$2.23 bil of 2024 notes was at 93 basis points (bps) on Nov 29, up 17bps from the record low reached last month. Its bonds still trade wider than those of US peers such as EBay Inc which has a lower rating from S&P Global Ratings.

The new bond sale comes after Alibaba struck a US$2.9 bil deal earlier in the month to buy a slice of China’s largest hypermart chain Sun Art Retail Group Ltd to pit it against Wal-Mart Stores Inc in the world’s largest retail market.

This article first appeared in Focus Malaysia Issue 261.