Alibaba share price: Company plans to raise $8bn in US bond sale

on Nov 14, 2014
Updated: Apr 9, 2020
Listen, Friday, November 14:Chinese e-commerce behemoth Alibaba Group Holding Ltd (NYSE:BABA) is planning its first US bond sale, just two months after it completed its record-breaking initial public offering.

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Alibaba plans to raise as much as $8 billion in the sale, according to a filing yesterday and multiple reports in the media. According to Fitch Ratings, Alibaba is expected to use the proceeds from the bond sale to repay an existing $8bn syndicated term loan facility that has been fully drawn down.
The company has hired Morgan Stanley, Citigroup, Deutsche Bank and JP Morgan to manage the sale, which is expected to attract strong interest from investors.
The International Financial Review (IFR) quoted an unnamed market participant as commenting: “Everyone will want this. It’s a first-time borrower, it’s high quality and it’s a marquee name. This is a great global story.”
According to media reports, the company would kick off a roadshow to promote the sale, with meetings in Boston and Hong Kong. The roadshow will then move to New York and Singapore on Tuesday and London on Wednesday.

In yesterday’s trading, Alibaba shares closed 2.4 percent lower at $114.84.
Standard & Poor’s and Fitch Ratings rated the bonds A+, while Moody’s Investors Service issued an equivalent A1 investment-grade rating. Fitch said that the ratings reflected Alibaba’s dominant position in China’s e-commerce market.
“The ratings also benefit from Alibaba’s robust profitability and strong cash generation,” the agency added.

Earlier this month Alibaba released its first quarterly report since it went public, which showed that the company’s Q2 revenue had soared 54 percent from the corresponding period a year earlier (Alibaba share price: Second quarter revenue increases 54 percent). Particularly impressive were the company’s mobile sales, which grew more than 10 times year-on-year.

While investor interest is expected to be high, some question Alibaba’s motives for tapping the debt market. Bloomberg quoted Nathan Barnard, a fixed-income analyst at Leader Capital Corp, as saying in a phone interview: “Given that they just had their IPO, they don’t necessarily need to come to market.” Barnard continued: They’re pretty flush with capital. It’s another example of companies being opportunistic and trying to take advantage of low rates while they can.”
In recent years the debt market has been targeted by major tech companies, including Apple Inc (NASDAQ:AAPL), Oracle Corp and Cisco Systems Inc, among others. Chinese Tencent Holdings Ltd and Baidu Inc also completed US bond sales earlier this year.
A spokesman for Alibaba told the Wall Street Journal that the sale was part of the “normal course of business.”
**As of yesterday’s US close buy Alibaba shares at $116.55**
**As of yesterday’s US close sell Alibaba shares at $114.84**


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