New York: Alibaba Group Holding raised $8 billion in its first sale of bonds at yields that were lower than originally offered after investors submitted orders of at least $57 billion to the e-commerce company.
"The premium we see associated with Chinese companies is absent in this case," Dorian Garay, a New York-based money manager for the global investment-grade debt fund at ING Investment Management, said in a telephone interview. "It feels like new-issue concession is non-existent."
Alibaba's debt offering adds to a banner year for corporate bonds with worldwide issuance of $3.8 trillion on pace to exceed $4 trillion for the first time. The Hangzhou, China-based company, which raised a record $25 billion in an initial public offering in September, will use proceeds to refinance some credit agreements, according to a November 13 statement.
The banks underwriting the biggest dollar-denominated notes by an Asian company lowered the premium by as much as 0.27 percentage point on its longest-dated bond, according to a person with knowledge of the offering, who asked not to be identified because the details are private.
Global scale
Alibaba sold the largest portions in equal $2.25 billion offers of five- and 10-year notes, according to data compiled by Bloomberg. The 2.5 per cent, five-year notes sold at a yield of 95 basis points above similar-maturity Treasuries and the 3.6 per cent, 10-year securities sold at a relative yield of 128 basis points, the data show.
"The market welcomes emerging-market names that are highly rated, particularly out of Asian countries that are highly rated for emerging-market standards," said Brigitte Posch, the London-based head of emerging-market corporate debt at Babson Capital Management. "Certain sectors benefit from a worldwide audience given the global scale of their business."
The notes weren't free to trade in Asia as of 3:12pm in Hong Kong because final term sheets weren't quite ready, said two people with knowledge of the matter, who asked not to be identified because the details are private.
In so-called gray market trading, which involves selling allocation rights on securities before they're deposited in a buyer's account, the notes in most tranches, after rallying initially, had moved back to be in line with the spreads at which they priced. The 2034 bonds were an exception, quoted around the 146 basis point area, according to Australia & New Zealand Banking Group Ltd. prices.
"You have to understand this sector," said Arthur Lau, the Hong Kong-based head of Asia ex-Japan fixed income at PineBridge Investments. "If you buy the 20-year bonds then you have to sit with the credit through multiple economic cycles. The information technology sector is growing fast in China but it's still evolving."
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