According to a November 20th report from Bloomberg, knowledgeable sources say Alibaba Group Holding Ltd (NYSE:BABA) has received at least $57 billion of orders from investors interested in the firm’s initial bond offering. That figure is over seven times the $8 billion in bonds the company was originally seeking to issue, and has led to underwriters moving to reduce the proposed yields.
Bloomberg’s sources also noted the order book for the bonds may be sold as soon as today. The very strong demand for securities issued by the Hangzhou, China-based company after a record $25 billion public stock sale in September indicates great investor enthusiasm.
The Chinese Internet titan already has over $11 billion in loans and credit lines, announced back on November 13th that it planned to use proceeds from the bond sale to refinance some credit agreements.
Anticipated terms for Alibaba bonds
The company is marketing three-year fixed-rate notes at around 70 basis points over same-maturity Treasuries, five-year debentures at around 95 basis points and seven-year securities at ballpark 115 basis points. Ten- and 20-year bonds are available at around 130 basis points and 150 basis points, respectively. Alibaba Group Holding Ltd (NYSE:BABA) is also selling three-year floating-rate notes, while giving up plans to include five-year floaters, according to the sources.
A mere $8 billion bond sale by Alibaba would surpass a $6.5 billion bond issue in October by Bank of China Ltd. to enter the record books as the largest dollar-denominated offering ever by an Asian company.
Of note, Morgan Stanley (NYSE:MS), Citigroup Inc (NYSE:C), Deutsche Bank AG (NYSE:DB) (ETR:DBK) and JPMorgan Chase & Co. (NYSE:JPM) are co-running Alibaba’s debt sale.
Alibaba Group Holding Ltd (NYSE:BABA)’s notes are expected to be rated A+, the fifth-highest investment-grade ranking, by Standard & Poor’s and to receive an equivalent A1 rating from Moody’s Investors Service.
No new issue premium
“The premium we see associated with Chinese companies is absent in this case,” noted Dorian Garay, a New York-based money manager for global investment-grade debt fund at ING Investment Management, in a telephone interview Thursday.
“It feels like new issue concession is non-existent,” he continued, saying the pricing doesn’t seem to reflect the risks associated with the name. Garay said he’s not purchasing the bonds.