According to Bloomberg, Alibaba Group Holding Ltd (NYSE:BABA) is planning its first bond sale and is seeking to raise as much as $8 billion with the U.S.-dollar-denominated issue. Bloomberg quotes knowledgeable sources as saying the company plans to use the funds to to refinance its current credit facilities.
The sources also noted that Morgan Stanley (NYSE:MS), Citigroup Inc (NYSE:C), Deutsche Bank AG (NYSE:DB) (ETR:DBK) and JPMorgan Chase & Co. (NYSE:JPM) will market the debt to investors as soon as next week.
Alibaba looking to consolidate and refinance at cheaper rates
Apparently Jack Ma wants Alibaba Group Holding Ltd (NYSE:BABA) to pay down the $4 billion term loan that the company obtained last year on which they currently 2.75 percentage points more than the London interbank offered rate. Libor, the rate at which banks say they can borrow from each other, is at about 0.23 percentage point this week.
Just based on back of the napkin calculations, that means investors should expect a less than 3% yield on the bonds given Alibaba is looking to improve on the 2.98% they are currently paying.
Bonds will be rated A+
Of note, the bonds have been rated A+, or the fifth highest investment-grade rating, by Standard & Poor’s, which is equal to an A1 rating by Moody’s Investors Service.
Alibaba Group Holding Ltd (NYSE:BABA)’s new debt issue would be on top of the $25 billion that it brought in the firm’s September IPO. The China-based e-commerce company currently has a market capitalization of nearly $300 billion, and has around $11 billion in loans and credit lines, based on Bloomberg data.
“The ratings reflect Alibaba’s dominant position in China’s online shopping market,” noted Fitch Ratings, who also ranked the company at A+. “The ratings also benefit from Alibaba’s robust profitability and strong cash generation.”
Alibaba Group Holding Ltd (NYSE:BABA) is trading down today on the news of the planned bond sale, with shares down more than 2% at $115.75.