Alibaba Resumes Plan for $5 Billion Bond After Revenue Gain

(Bloomberg) --

Alibaba Group Holding Ltd. will kick off a dollar bond sale to raise as much as $5 billion this week, picking up a plan that went quiet last month when its founder had been out of sight for months.

The Chinese e-commerce giant will initiate a series of investors calls for the planned notes with various maturities up to 40 years from Wednesday, according to a person familiar with the matter. The upcoming offering is expected to include a tranche of sustainability bonds due 2041, said the person, who isn’t authorized to speak publicly and asked not to be identified. The debt sale could raise as much as $5 billion, according to another person with knowledge of the matter, who also asked not to be identified.

In a filing Tuesday that didn’t include details on the size or maturities, Alibaba said the sustainability bonds will be the company’s first ever, with proceeds earmarked for eligible projects like responding to the Covid-19 crisis and investing in renewable energy. The firm added that it will use proceeds from the new dollar debt offering to boost working capital and repay its offshore debt.

Alibaba was aiming to raise at least $5 billion a month ago in an issuance that could have been increased to $8 billion depending on the reception, Bloomberg reported in early January. Investors had wondered then whether the company could pull off the sale as founder Jack Ma hadn’t been seen in public since his Internet empire was hit with growing antitrust scrutiny.

The company is resuming the debt plans after reporting a 37% increase in quarterly revenue that beat analysts’ expectations, giving it a much-needed boost amid the regulatory crackdown. Beijing in November torpedoed affiliate Ant Group Co.’s record initial public offering and began an investigation into the online retailer, fueling uncertainty over the future of Ma’s tech empire. But the billionaire entrepreneur’s brief return to public view in January signaled that worst-case scenarios may be less likely.

Alibaba’s dollar bonds have enjoyed a strong rebound since a selloff in China’s offshore investment grade notes at the beginning of the year. Spreads on the firm’s 3.4% note due 2027 are indicated at about 97.5 basis points over Treasuries, some 38 basis points tighter than its January high, Bloomberg-compiled data show. The spreads were flat on Wednesday morning, according to traders.

Alibaba plans to issue bonds in four maturities, with the longest due in 40 years, one of the people said. The plans are subject to change per market and other conditions, according to the filing, which named Citigroup Inc., Credit Suisse Group AG, Morgan Stanley, JPMorgan Chase & Co. and China International Capital Corp. as the underwriters. On Wednesday, Moody’s Investors Service assigned an A1 rating, its fifth highest, to the proposed notes, while Fitch Ratings graded them A+, in line with Alibaba’s senior unsecured rating.

Alibaba isn’t alone in choosing to tap the global bond market now. Asian borrowers just set a new record January for dollar bond sales, capitalizing on investors’ hunger for higher-yielding assets amid ultra-low interest rates.

The company didn’t immediately comment when asked about the details of the planned issuance.

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