Alibaba will tap international debt markets for as much as $8bn this month in what could be one of the country’s biggest ever dollar bonds at a time when the company is being squeezed by regulators and rivals.
The Chinese ecommerce group plans to raise at least $5bn in its issue, according to people familiar with the plans, building on a list of major tech groups including Tencent and Google, which took advantage of record-low interest rates last year to gather billions of dollars. If demand is strong, the total could be raised to $8bn, the people said.
Alibaba had $44bn in cash on its balance sheet at the end of September, much of it held onshore in Chinese renminbi. The dollar raise will provide more flexibility to invest outside of China and develop its overseas operations, according to one of the people familiar with the plans.
The deal comes at a delicate time for the company founded by billionaire Jack Ma. Its Hong Kong-listed shares have dropped almost a quarter since November, when Chinese authorities suspended the $37bn stock market listing of sister company Ant, which was also founded by Mr Ma.
He has stepped out of the public spotlight since the dramatic cancellation of what was expected to be the world’s biggest initial public offering in 2020.
Regulators also announced an antitrust investigation into Alibaba last month, probing suspected abuse of its market dominance. China’s market regulators conducted interviews and collected evidence at Alibaba’s headquarters in Hangzhou, and lawyers say the potential fine could run as high as 10 per cent of its previous year’s sales.
The company announced last month it would increase the size of its share buyback programme from $6bn to $10bn, covering the period until the end of 2022. The programme began in the fourth quarter of last year.
Beyond regulatory issues, Alibaba faces growing competition from Pinduoduo in its core ecommerce business, with the upstart online shopping platform amassing 731m annual customers, behind Alibaba’s 757m. Rival Meituan is also carving out a larger share of China’s vast food delivery market as it seeks to push out Alibaba-owned Ele.me.
Rising inflation expectations, which could push up interest rates and make bond sales less attractive for issuers, have been stoked by the victory of US president-elect Joe Biden and Senate gains by Democrats.
Yields on 10-year US Treasuries on Wednesday rose above 1 per cent for the first time in more than nine months as Democrats appeared set to win key run-off elections in Georgia and gain control over the US Senate.