Alibaba Group Holding Ltd (阿里巴巴) raised US$8 billion in its first sale of bonds at yields that were lower than originally offered after investors submitted orders of at least US$57 billion to the e-commerce company.
“The premium we see associated with Chinese companies is absent in this case,” said Dorian Garay, a New York-based money manager for the global investment-grade debt fund at ING Investment Management Co, in a telephone interview. “It feels like new-issue concession is non-existent.”
Alibaba’s debt offering adds to a banner year for corporate bonds with worldwide issuance of US$3.8 trillion on pace to exceed US$4 trillion for the first time. The Hangzhou, China-based company plans to use proceeds to refinance some credit agreements, according to a Nov. 13 statement.
The banks underwriting the biggest US dollar-denominated notes by an Asian company lowered the premium by as much as 0.27 percentage points on its longest-dated bond, according to a person with knowledge of the offering, who asked not to be identified because the details are private.
Alibaba sold the largest portions in equal US$2.25 billion offers of five and 10-year notes, according to data compiled by Bloomberg. The 2.5 percent, five-year notes sold at a yield of 95 basis points above similar-maturity Treasuries and the 3.6 percent, 10-year securities sold at a relative yield of 128 basis points, the data showed.
“The market welcomes emerging-market names that are highly rated, particularly out of Asian countries that are highly rated for emerging-market standards,” said Brigitte Posch, the London-based head of emerging-market corporate debt at Babson Capital Management LLC. “Certain sectors benefit from a worldwide audience given the global scale of their business.”
The notes yesterday were not free to trade in Asia as of 3:12pm in Hong Kong because final term sheets were not quite ready, said two people with knowledge of the matter, who asked not to be identified because the details are private.
In so-called gray market trading, which involves selling allocation rights on securities before they are deposited in a buyer’s account, the notes in most tranches, after rallying initially, had moved back to be in line with the spreads at which they priced. The 2034 bonds were an exception, quoted around the 146 basis point area, according to Australia & New Zealand Banking Group Ltd prices.
“You have to understand this sector,” said Arthur Lau, the Hong Kong-based head of Asia ex-Japan fixed income at PineBridge Investments.
“If you buy the 20-year bonds then you have to sit with the credit through multiple economic cycles. The information technology sector is growing fast in China, but it’s still evolving,” he said.
Debt of Chinese companies typically yield about 20 basis points to 50 basis points more than that of their US peers, said Anthony Leung, a Nomura Holdings Inc credit research analyst in Hong Kong, in a report this week. A basis point is 0.01 percent.
Alibaba also sold US$1.5 billion of 3.12 percent, seven-year notes, US$1 billion of 1.62 percent, three-year securities, US$700 million of 4.5 percent, 20-year bonds, and US$300 million of three-year floaters, Bloomberg data showed.
The company initially offered the 20-year bonds at a premium of 175 basis points above similar-maturity Treasuries, according to a person with knowledge with the offering.
The US$8 billion sale eclipsed a US$6.5 billion issue last month by Bank of China Ltd (中國銀行) to become the biggest US dollar-denominated offering by an Asian company.
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