Alibaba Sells $5 Billion of Bonds
February 05 2021 - 3:40AM
Dow Jones News
By Frances Yoon
Alibaba Group Holding Ltd. sold $5 billion of bonds, showing
investors remain eager to back the Chinese e-commerce giant despite
its recent run-ins with authorities.
The company issued four sets of bonds priced to yield between
2.143% and 3.251%, Alibaba said in a filing. Alibaba sold $1.5
billion each of 10-year and 30-year debt, plus $1 billion each of
bonds due in 20 and 40 years.
The 20-year bonds were designated as sustainability notes,
meaning the proceeds will be used to fund projects such as building
greener offices or installing more energy-efficient data
centers.
Alibaba shares have swung sharply in recent months, after a
speech in October by founder Jack Ma prompted Chinese President Xi
Jinping to call off the blockbuster listing of Ant Group Co., the
company's financial-technology affiliate. Mr. Ma has since largely
vanished from public life, though he resurfaced briefly in a video
appearance in January.
In December, Chinese authorities launched an antitrust probe
into Alibaba. And in January, The Wall Street Journal reported U.S.
officials considered adding Alibaba to an investment blacklist that
blocks Americans from buying stocks and bonds of certain Chinese
companies, though the company wasn't ultimately added.
Joel Liauw, an analyst at CreditSights, said the company was one
of Asia's strong borrowers, thanks to its high profitability,
steady cash-flow generation and large cash pile. "Although we do
expect more headline risks stemming from the U.S.-China
geopolitical tensions as well as the antitrust probe, Alibaba's
solid credit profile should provide some cushion against a
short-to-medium term downturn," Mr. Liauw said in an email.
On Tuesday, Alibaba reported forecast-beating quarterly results,
with earnings rising 52% to the equivalent of $12.3 billion, as
sales surged 37%.
Annisa Lee, head of Asia-Pacific credit research at Pacific
Investment Management Co., said she is constructive on the
long-term growth of the Chinese technology sector, and particularly
companies that were strategically important to China's growth. The
higher interest rates investors receive when they buy tech debt
issued by Chinese companies versus their U.S. peers "presents an
investment opportunity," Ms. Lee said.
In one example of this, Alibaba has existing dollar bonds due
2037 which are yielding 2.98%. In comparison, Amazon.com Inc.,
which has similar credit ratings, has a bond due the same year that
yields 2.38%, FactSet data show.
In recent years, Alibaba's bonds have generally risen in price
as part of a wider market rally. That has pushed down yields and
effectively reduced the cost of any new borrowing for Alibaba.
Yields on its debt jumped in late December and early January, but
have since pulled back.
Alibaba has solid investment-grade credit ratings, with an A1
rating from Moody's Investors Service and similar A+ grades from
Fitch Ratings and S&P Global Ratings.
All three ratings companies reiterated those ratings this week.
Fitch noted the group's robust profitability and conservative
financial position, and said China's tougher stance on antitrust
was unlikely to substantially hurt Alibaba's creditworthiness.
S&P said it believed Alibaba can "weather the potential
outcomes" of the competition probe, though it said it may cut
forecasts for revenue and profit growth authorities tighten
antitrust regulation. Moody's said its rating took into account
increased regulatory risk and "potential contingent liabilities"
tied to Ant.
This is Alibaba's third big sale of dollar bonds, after an $8
billion deal in 2014 and a $7 billion follow-up in 2017.
Units of Citigroup Inc., Credit Suisse Group AG, Morgan Stanley,
JPMorgan Chase & Co. and China International Capital Corp.
handled the bond sale.
Write to Frances Yoon at frances.yoon@wsj.com
(END) Dow Jones Newswires
February 05, 2021 03:25 ET (08:25 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Alibaba (NYSE:BABA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Alibaba (NYSE:BABA)
Historical Stock Chart
From Sep 2023 to Sep 2024