STRONG DEBUT FOR ALIBABA BONDS
Company’s US$7b sale attracts blow-out response, setting a benchmark for Asia’s technology sector
ALIBABA Group Holding Ltd’s newly-minted bonds rallied yesterday after the Chinese Internet firm’s US$7 billion (RM28.7 billion) multi-tranche sale attracted a blow-out response and set a precedent for rival companies to follow, said analysts.
Strong demand for the sale, the biggest by an Asian borrower so far this year, allowed Alibaba to significantly tighten the prices it offered. Orders for the bonds totalled about US$40 billion, said bankers.
The five-tranche deal involved bonds maturing at points from 5.5 years to 40 years. The range allowed China’s biggest e-commerce company to develop a yield curve which peers could use to determine the attractiveness of maturities when issuing their own debt, said analysts.
“The tech sector (for bonds) is small in Asia and this has set a precedent for others to follow,” said CreditSights analyst Sandra Chow.
She said Alibaba, Baidu Inc and Tencent Holdings Ltd are trailblazers in Asia, where investors were generally less familiar with tech industry bonds than in the United States.
Alibaba’s latest sale was its second, whereas Baidu and Tencent are seasoned issuers.
“It does help build up the market and the range of maturities would create better trading liquidity across the curve,” said Chow.
The tranches for the 5.5-, 10-, 20-, 30- and 40-year maturities were priced at 73, 108, 118, 138 and 158 basis points (bps) over US Treasuries.
In the secondary market the bonds were trading at 63-62, 106105,106-103, 125-122 and 144-141 bps, respectively.
The deal pricing was already far tighter than initial indications of about 100, 125-130, 140, 160 and 180 bps respectively. “Alibaba is a fundamentally sound company with a dominant market position and solid positive cash flows,” said Alaa Bushehri, portfolio manager for emerging market debt at BNP Paribas Asset Management.