Alibaba Group, China’s largest e-commerce company, announced on Wednesday that it had successfully raised $5 billion through a dual-currency bond offering, marking the largest such deal in the Asia-Pacific region this year. The company issued bonds in both US dollars and offshore yuan, with the deal drawing significant interest from global investors.
The bond offering consisted of $2.65 billion in US dollar-denominated notes and 17 billion yuan (approximately $2.35 billion) worth of offshore yuan-denominated bonds. This marks Alibaba’s return to the dollar bond market since 2021, and it is the largest corporate bond issued in the Asia-Pacific region this year, according to data from London Stock Exchange Group (LSEG).
The US dollar-denominated bonds were structured in three tranches: 5.5-year, 10.5-year, and 30-year, with the final pricing being 25 basis points lower than initially anticipated, according to a term sheet seen by Reuters. The coupon rates for the dollar bonds were set at 4.875% for the 5.5-year bond, 5.25% for the 10.5-year bond, and 5.625% for the 30-year bond.
Meanwhile, the offshore yuan-denominated bonds also saw tighter pricing across four tranches: 3.5-year, 5-year, 10-year, and 20-year. These tranches were particularly attractive to investors in the Asia-Pacific region, which made up the majority of the bondholders. In total, global demand for the dollar bonds surged to $14.6 billion, reflecting robust investor confidence in Alibaba despite the challenges facing the company in recent years.
Alibaba stated that the proceeds from the bond issuance would be used for general corporate purposes, including repaying offshore debt and repurchasing shares. The dual-currency nature of the deal is seen as a strategic move to tap into different pools of capital and diversify the company’s funding sources, while also optimising its debt portfolio.
This bond deal comes at a time when Alibaba, like many other Chinese tech giants, is navigating a challenging business environment. The company has faced increased scrutiny from both domestic regulators and international governments, particularly over concerns about data security and anti-competitive practices. In addition, the Chinese government has implemented a series of crackdowns on big tech companies, which has weighed on Alibaba’s growth prospects.
Despite these challenges, Alibaba has shown resilience, with its stock price gaining 11.4% year-to-date, despite a slight dip of 2% in Hong Kong trading on the day the bond deal was announced. The company’s ability to raise such a significant amount of capital is a testament to its strong market position and the confidence investors still have in its long-term prospects.
More Read
The timing of the bond issuance is noteworthy, coming amid a broader trend in which Chinese companies have been increasingly turning to bond markets to raise funds. This is partly due to the tightening of access to credit in the domestic market, as well as increased demand from international investors looking for exposure to the Chinese economy, despite the geopolitical risks associated with the country.
In addition to the bond offering, Alibaba is expected to continue with its broader efforts to strengthen its business, including through restructuring its various divisions and focusing on core areas such as e-commerce, cloud computing, and logistics. The company’s leadership has expressed confidence in its ability to navigate the current challenges and remains focused on creating long-term value for its shareholders.
With the successful completion of this bond issuance, Alibaba has demonstrated that it can still attract significant interest from investors, even in a volatile and uncertain market environment. The funds raised will provide the company with greater financial flexibility and support its ongoing efforts to weather the challenges ahead.
As Alibaba continues to adjust to the shifting economic landscape, this bond deal serves as a crucial step in reinforcing its financial position and ensuring its continued growth in both the domestic and international markets.
