Alibaba draws US$46b of demand for US$7b bond sale

[HONG KONG] Alibaba Group Holding sold US$7 billion bonds on Wednesday in a deal that investors clamoured for, ordering more than six times as many securities as were for sale.

The deal eclipsed China Evergrande Group's US$6.6 billion offering in June to become the biggest sale in Asia from a non-bank issuer, according to data compiled by Bloomberg.

Eager investors were already flipping the bonds in the after market late Wednesday in New York. The offering's 4.2 per cent 30-year bond rose to 101.2 cents on the dollar at 6.13pm, up from an issue price of 99.8 cents.

"The market is screaming out for some high-quality issuers right now" such as Alibaba, Hayden Briscoe, head of Asia Pacific fixed income at UBS Asset Management in Hong Kong, said before the bond sale was concluded at the end of US trading on Wednesday.

The Chinese e-commerce giant sold the notes in five parts, with maturities of 5.5, 10, 20, 30 and 40 years. Investors orders on the deal reached US$46 billion, according to people familiar with the offering, who are not authorised to speak publicly and asked not to be identified.

RECORD MATURITY

The longest portion of the offering, US$1 billion of 4.4 per cent 40-year bonds, yields 1.58 percentage point over comparable government debt. That's down from early talk from underwriters of around 1.8 per cent. It's the longest maturity on record from a Chinese corporate issuer, according to data compiled by Bloomberg.

"Alibaba can afford to pay a bit more for longer-dated funding," Anthony Leung, director of Asia-Pacific credit research at Wells Fargo Securities LLC in Hong Kong, said before the final pricing of the deal.

China's second-biggest company by market value, founded by billionaire Jack Ma, raised US$8 billion in its first bond sale in 2014, which remains the largest US dollar-denominated issue by any firm in Asia outside of Japan. It exchanged the notes for new debentures in 2015.

Morgan Stanley, Citigroup Inc, Credit Suisse Group AG, Goldman Sachs Group Inc. and JP Morgan Chase & Co managed the sale.

Issuers from Asia outside of Japan have already sold more than US$293 billion in dollar notes so far this year, an all-time high, compared with about US$186 billion for all of 2016, according to data compiled by Bloomberg.

Alibaba had US$1.3 billion of bonds due on Nov 28, Bloomberg data show. It obtained a US$5.15 billion five-year revolving credit facility in April.

The spread on Hangzhou-based firm's US$2.23 billion of 2024 notes was at 93 basis points on Wednesday, up 17 basis points from the record low reached last month. Its bonds still trade wider than those of US peers such as EBay Inc, which has a lower rating from S&P Global Ratings.

The new bond sale comes after Alibaba struck a US$2.9 billion deal earlier this month to buy a slice of China's largest hypermart chain Sun Art Retail Group to pit it against Wal-Mart Stores in the world's largest retail market.

BLOOMBERG