HONG KONG (Reuters) – China’s Alibaba Group Holding Ltd plans to raise at least $ 5 billion this month from the sale of a US dollar-denominated bond, said four knowledgeable people, overseen by fellow founder Jack Ma’s empire.
Depending on the investors’ response, the proceeds could reach $ 8 billion, which the e-commerce leader is likely to use for general business spending, one said.
The fundraising will be a test of investor sentiment towards Alibaba amid a regulatory crackdown against it and financial technology firm Ant Group. Chinese officials have cracked down on Ma’s business empire since he openly criticized the country’s regulatory system in October, sparking a chain of events that resulted in Ant Group’s $ 37 billion stock exchange listing.
Ma’s absence from the public in the meantime has sparked social media speculation about his whereabouts.
The bond sale plan, including the timeline, has not yet been finalized and is subject to change, the people said, who were not identified because they were not authorized to speak to the media.
Alibaba declined to comment.
Since Ma’s speech, Chinese regulators have begun an antitrust investigation into Alibaba and fintech has mandated Ant to change its lending and other consumer finance business, including the creation of a holding company to meet its capital requirements.
US President Donald Trump has also fueled tensions by banning transactions with eight Chinese software applications, including Ant Group’s Alipay mobile payment app.
Chinese regulators are also assessing Ant’s equity investments in dozens of companies and are considering instructing the company to divest some of those investments, Reuters reports.
“Investors need Jack Ma to make some sort of public appearance to give them confidence that the bond is well received,” said an Asian credit analyst at a European bank, who was not authorized to speak to the media and therefore refused identified.
“Given the current situation of Alibaba, they will have to price it at a higher price,” the analyst said. “But in the long run, Alibaba is still a company worth investing in.”
Hong Kong-listed Alibaba stocks rose a whopping 4% on Wednesday, from a 0.4% decline in the reference index. The stock price had fallen by 5.6% in the past three sessions.
Last month, Alibaba said it would increase the value of a share buyback program from $ 6 billion to $ 10 billion.
DEBT MARKET BOOM
Alibaba’s international bond offering, if completed, would be the group’s third, Refinitiv data showed. It sold an $ 8 billion US dollar bond in 2014 and a $ 7 billion tranche in 2017, the data showed.
With the latest bond sale, Alibaba will join a slew of Asian companies that have benefited from cheaper funding costs and abundant liquidity in global markets in recent months.
The companies sold last year were $ 363.2 billion worth of US dollar bonds in Asia, 9% more than a year earlier and the highest value ever, Dealogic data showed.
The terms of Alibaba’s offer were not immediately known. Two of the people said the tenure will likely be 10 years and marketing documents will likely be available next week.
One of the people involved in the deal said Alibaba wanted to use the issue to send a message to the market that “in light of the latest regulatory scrutiny, the company is still doing well and has the backing of some investors “.
LightStream Research analyst Oshadhi Kumarasiri, who publishes on the Smartkarma platform, said Alibaba has about $ 10 billion in long-term debt in November, so it makes sense to refinance it – even if the timing suggests this is about raising trust.
“However, I am more pragmatic and would still be concerned about staying long on Alibaba with the current regulatory criticism.”
Reporting by Sumeet Chatterjee, Julie Zhu and Kane Wu; Additional reporting by Scott Murdoch and Anshuman Daga; Edited by Christopher Cushing