Economy

Alibaba’s $ 38 billion bond sale shows that Jack’s fans still believe

Bloomberg

(Bloomberg) – Alibaba Group Holdings Limited drew strong bids to sell $ 5 billion in bonds, demonstrating investor confidence in the e-commerce giant’s long-term prospects amid easing tensions with Chinese regulators.

The four-segment offering received more than $ 38 billion in orders at its peak, according to people familiar with the matter. The bonds consisting of maturities of 10 years, 20 years, 30 years and 40 years were priced at 30 basis points to 40 basis points less than the initial guidance, as measured in returns over similar Treasury bills, people said, authorized to speak publicly.

The sale of new debt in dollars is the largest in Asia since its rival Tencent Holdings Ltd. Worth $ 6 billion in May. It comes amid growing expectations that Jack Ma’s tech empire may have avoided the worst-case scenarios – which ranged from a government-led takeover to the break-up of his companies – after the billionaire businessman briefly returned to the public last month and as Ant Group began a process of overhaul. Washington’s decision to drop deliberations over an investment ban on the company and Alibaba’s quarterly sales performance that bypassed consensus also helped ease concerns about its future amid a regulatory campaign.

Alibaba’s bonds have enjoyed good acceptance in the market, with prices tightening significantly from their initial guidance. Zhang Weiliang, Macro Strategic Analyst at DBS Bank Ltd. In Singapore, the approval of the Ant restructuring plan reduced uncertainty over the regulatory environment, contributing to the appetite for a new Alibaba issuance.

Alibaba dollar-denominated bonds and shares rose on Thursday after Bloomberg News reported that Ant Group and Chinese regulators had agreed on a restructuring plan that would transform Jack Ma’s fintech giant into a financial holding company. While this would make Ant subject to similar capital requirements to those of banks, analysts say the agreement indicates that it is now unlikely to have to separate parts of its business. Meanwhile, Reuters has reported that Ant may abandon its consumer data operations, a concession to regulators that could enable the company to revive its initial public offering plans that were suddenly halted in November.

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Alibaba owns roughly a third of Ant, and CEO Daniel Zhang told analysts Tuesday that the company is unable to assess the impact of the company’s ongoing restructuring on its business, although he added that only a “very small percentage” of Ant’s credit plans are being used to conduct. Payments into their own market. Zhang said the online retailer, facing its own antitrust investigation, has set up a special task force to conduct internal reviews and is actively communicating with antitrust regulators about compliance with their requirements.

On Tuesday, the company announced a stronger-than-expected 37% increase in quarterly sales, adding that it plans to continue investing for long-term growth in areas such as cloud and artificial intelligence. “Alibaba has many growth engines in the coming years,” Jefferies analyst Thomas Chung wrote in a note after earnings.

Bloomberg reported in early January that Alibaba was originally aiming to raise at least $ 5 billion through the sale of debt that could have been increased to $ 8 billion depending on the reception. Investors wondered at the time whether the company could close the deal because the founder had not appeared in public since his online empire came under increasing antitrust scrutiny. He has since appeared on live video chat.

The company collected cash in part for general corporate purposes, including working capital needs, external debt repayments, potential acquisitions or investments in complementary businesses, according to people familiar with the deal. The 20-year slide of Alibaba’s new offering is its first sustainability bond.

Alibaba dollar bonds have enjoyed a strong recovery since the Chinese offshore investment grade bonds were sold at the start of the year. The spreads were indicated on the company’s 3.4% note due in 2027 at around 78.7 basis points on Treasury notes on Thursday, which is about 57 basis points narrower than their January high, according to the latest data compiled by Bloomberg.

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(Updates with chart and bond levels in the last paragraph)

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