Alibaba has asked its creditors to let it extend the draw-down period of an $8 billion loan which was originally set to expire January 30, 2014, which would give the company more time to set up its initial public offering.
“We have plenty of cash on the balance sheet and there is no need to draw down at this time, so we are extending the availability of funds to maintain flexibility,” the company said in a statement, Elzio Barreto and Prakash Chakravarti report for Reuters.
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Alibaba now intends to list in the US
Alibaba had been trying to hold its IPO by the end of this year, but it ran into problems with the Hong Kong stock exchange because companies aren’t allowed to have different classes of shares with different voting rights. Alibaba, which controls about 80% of the Chinese online retail space and is valued at $80 billion, is now looking to list in the US because it would be possible for partners including Chinese entrepreneur Jack Ma to retain control over appointing board members. But changing venues means that much of the work that went into setting up the intended Hong Kong IPO has to be redone. As there’s been no official announcement about the new venue, there’s also the possibility that Alibaba is still weighing its options.
Alibaba offers an early bird fee to banks
Alibaba has offered banks a $50,000 “early bird” fee if they decide in favor of the extension by December 20th and the extension goes through. Of course this is a small sum compared to the amount of money under discussion, but Alibaba must want a firm answer as soon as possible so that it knows whether it has plenty of time to work out its IPO or if it has to clear all the remaining hurdles and go public by the end of January.
Realistically, it would be pretty surprising for the banks to deny Alibaba’s request. The company has had an incredible year, including breaking new records in online sales in November. The company is growing so quickly that it is investing in the Chinese logistics sector so that its sales growth will no longer be hampered by out of date technology. With so much recent success and plenty of interest in the IPO, banks will probably be happy to extend its credit.