HONG KONG: Alibaba Group Holding’s newly minted bonds rallied on Thursday after the Chinese Internet firm’s $7 billion (SR26.25 billion) multi-tranche sale attracted a blow-out response and set a precedent for rival companies to follow, analysts said.
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 totaled about $40 billion, bankers said.
The five-tranche deal involved bonds maturing at points from 5.5 years to 40 years. The range allows 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, analysts said.
“The tech sector (for bonds) is small in Asia and this sets a precedent for others to follow,” said CreditSights analyst Sandra Chow.
She said Alibaba, Baidu and Tencent Holdings are trailblazers in Asia, where investors were generally less familiar with tech industry bonds than in the US. Alibaba’s latest sale is its second, whereas Baidu and Tencent are seasoned issuers.
“It does help build up the market and the range of maturities will 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, 106-105,106-103, 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.
Alibaba holds 68.1 billion yuan in net cash, meaning its total cash exceeds its total debt. Analysts said however that it was wise for the company to borrow.
“Raising debt when they can is smart — they could use the money for more investments and acquisitions in future. They have talked about FMCG (fast-moving consumer goods), food or logistics, so we could see purchases there,” said Chow.
The company sold $700 million in 2.800 percent bonds due 2023, $2.55 billion in 3.400 percent bonds due 2027, $1 billion in 4.000 percent bonds due 2037, $1.75 billion in 4.200 percent bonds due 2047.
It also sold $1 billion in 4.400 percent bonds due 2057 — a time frame more than twice as long as the company, founded in 1999, has been in existence.
Alibaba’s jumbo bond deal sets sector benchmark in Asia
Alibaba’s jumbo bond deal sets sector benchmark in Asia
Closing Bell: Saudi main index closes in red at 11,167
RIYADH: Saudi Arabia’s Tadawul All Share Index dipped on Wednesday, losing 46.43 points, or 0.41 percent, to close at 11,167.54.
The total trading turnover of the benchmark index was SR4.88 billion ($1.30 billion), as 66 of the listed stocks advanced, while 192 retreated.
The MSCI Tadawul Index decreased, down 5.52 points, or 0.37 percent, to close at 1,506.55.
The Kingdom’s parallel market Nomu lost 153.40 points, or 0.65 percent, to close at 23,486.52. This comes as 32 of the listed stocks advanced, while 31 retreated.
The best-performing stock was Tourism Enterprise Co., with its share price surging 9.95 percent to SR14.36.
Other top performers included Mobile Telecommunication Co., Saudi Arabia, which saw its share price rise by 5.32 percent to SR11.48, and Al Masar Al Shamil Education Co., which saw a 4.86 percent increase to SR22.89.
On the downside, Almoosa Health Co. was the day’s weakest performer, with its share price falling 4.81 percent to SR150.40.
Dallah Healthcare Co. fell 3.81 percent to SR113.50, while Saudi Research and Media Group dropped 3.44 percent to SR100.90.
On the corporate front, Arabian Plastic Industrial Co. has signed a non-binding memorandum of understanding with K. K. Nag to explore the establishment of a specialized manufacturing facility for expanded polypropylene products.
According to a Tadawul statement, the agreement sets out initial mutual obligations and rights between the two parties as part of APICO’s broader expansion strategy to increase production capacity and meet rising industrial demand.
The company’s share price rose 1.21 percent to SR43.52 on the parallel market.
