Peak demand for $5b bond offering shows global investors still have faith in Alibaba

Photo: Bloomberg

Alibaba Group Holding Ltd.’s $5 billion US-dollar bond offering received demand for eight times the debt offered, underscoring global investors’ faith in founder Jack Ma’s e-commerce behemoth despite a regulatory crackdown on his empire.

Pricing for the deal was set on Friday tighter than initially flagged by the company on Thursday, indicating robust demand to buy the rare debt float. The latest international bond offering is Alibaba‘s third, according to data from Refinitiv.

Several sovereign wealth funds were among the buyers, along with high profile US long-only funds, a person with direct knowledge of the deal told Reuters, adding demand was “extremely strong” across the various maturity-tranches.

The company did not immediately respond to a request for comment on the oversubscription rate or the nature of its investors.

Investor response to the deal was seen as a sentiment test towards Alibaba amid regulatory heat for billionaire Ma’s business empire, triggered by a speech in late October in which he publicly criticised the country’s regulatory system.

That set off a chain of events that resulted in the halting of affiliate Ant Group’s $37 billion stock market listing. Authorities also launched an antitrust probe into the tech sector, with Alibaba firmly in the crosshairs.

Ma subsequently disappeared from public view for three months.

Alibaba required permission from China’s central economic planner, the National Development and Reform Commission (NDRC), to issue the bonds, the source said, giving investors confidence the regulators were not cracking down too heavily on the company.

“Ant Group seems to be reaching some kind of progress and Jack Ma was out in public, so there was a sense that the clouds are clearing,” the source said, declining to be named as they were not authorised to speak to the media.

The $5 billion was raised in four tranches of 10-, 20-, 30- and 40-year debt. Alibaba decided to tighten pricing by 30 to 40 basis points, double the usual amount from initial pricing for U.S. investment grade bonds, on strong demand, according to the final terms.

Alibaba had flagged it would use the money to help pay down offshore debt and fund future potential acquisitions and investments in “complementary businesses”.

Alibaba does not need cash. It does look like many of the tech companies are trying to take advantage of the low interest-rate environment,” analyst Mitchell Kim, who publishes on independent investment research network Smartkarma told Reuters.

The 10-year bond raised $1.5 billion and was priced at U.S. 10-year Treasuries plus 100 basis points, while a 20-year tranche, Alibaba‘s first sustainable bond raised $1 billion at 100 basis points over the benchmark.

A higher proportion of Asian investors bought into this deal than the last time the company issued U.S. dollar debt in 2017, which was dominated by U.S. buyers at that time, the source said.

Reuters

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.