Alibaba Group Holding raised US$5 billion from a multi-tranche dual-currency bond offering, the Chinese e-commerce giant said on Wednesday, an initiative that looks to enhance Hong Kong‘s role as an international financial centre.
Hangzhou-based Alibaba, owner of the South China Morning Post, concurrently issued US$2.65 billion in US dollar-denominated notes and 17 billion yuan (US$2.35 billion) in offshore yuan-denominated notes, following the firm’s announcement on Monday of a bond offering plan. Net proceeds are to be used for general corporate purposes, including repayment of offshore debt and share buy-backs.
The company’s latest bond offering reflects efforts by the mainland and Hong Kong to bolster the city’s financial standing, including its function as an offshore centre to trade yuan-denominated assets.
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Chinese Vice-Premier He Lifeng said at the Global Financial Leaders’ Investment Summit this week that Beijing will continue to back the city’s role as the offshore yuan hub, part of a long-term strategy outlined in China’s third plenum. The Communist Party‘s third plenum in July mapped out a wide range of measures that the country will focus on for the next five years and beyond.
Alibaba’s latest deal already represents the biggest corporate bond issue of its kind in the Asia-Pacific region this year, according to London Stock Exchange Group data. It also marks Alibaba’s return to the public dollar-bond market after its US$5 billion offering in 2021.
The company’s yuan-denominated bond offering was also the largest such corporate debt issue in Hong Kong.
“Hong Kong’s role as an offshore yuan centre will get stronger in the future,” said Kenny Ng Lai-yin, a strategist at Everbright Securities International. “After all, Hong Kong is a financial centre and its connection with the mainland and the world [provides] great advantage to developing its role as a yuan hub. [The city] has the state’s support.”
A bird’s-eye view of Alibaba Group Holding’s headquarters in Hangzhou, the capital of eastern China’s Zhejiang province. Photo: AFP alt=A bird’s-eye view of Alibaba Group Holding’s headquarters in Hangzhou, the capital of eastern China’s Zhejiang province. Photo: AFP>
An analyst at a mainland bond rating agency, who declined to be named, said China has been working for years to create a vibrant “dim sum bond” market, with yuan-denominated bonds issued in Hong Kong. This would involve the Ministry of Finance and the local governments of Guangdong, Hainan and Shenzhen as the main bond issuers, followed by state-owned enterprises and other industrial entities.
There was strong market demand for Alibaba’s latest bond issue, according to the order book reviewed by the Post. The offering was oversubscribed multiple times, with most investors coming from the Asia-Pacific region and banks as major buyers of the yuan-denominated notes.
Alibaba’s latest US dollar notes issue is made up of three tranches: US$1 billion maturing in 2030, with a 4.875 per cent coupon; US$1.15 billion due in 2035, with 5.25 per cent interest; and US$500 million reaching maturity in 2054, with a 5.625 per cent coupon.
The yuan-denominated notes consist of four tranches: 8.4 billion yuan maturing in 2028, 5 billion yuan payable in 2029, 2.5 billion yuan due in 2034, and 1.1 billion yuan to be settled in 2044 – with interest rates of 2.65 per cent, 2.8 per cent, 3.1 per cent and 3.5 per cent, respectively. These notes were offered and sold only to “certain non-US persons”, according to Alibaba.
The US dollar and yuan bonds’ respective closing dates are November 26 and November 28.
The coupon offered by Alibaba in the yuan-denominated portion of its latest bond offering was higher than other yuan bonds in the market. For example, the coupon of the five-year yuan-denominated Chinese government treasury bonds issued last month was set at 2.39 per cent, while the coupon of the 10-year yuan bonds issued by MTR Corp in September was at 2.75 per cent.
A pedestrian walks by an advertisement for the Singles’ Day promotion of Alibaba Group Holding’s Tmall shopping platform. Photo: VCG via Getty Images alt=A pedestrian walks by an advertisement for the Singles’ Day promotion of Alibaba Group Holding’s Tmall shopping platform. Photo: VCG via Getty Images>
Alibaba’s New York-listed shares, which have gained 16.5 per cent year to date, closed at US$87.11 on Tuesday, showing little reaction to the dual-currency bond deal. The group’s Hong Kong-listed shares closed at HK$84.55 on Wednesday.
The company has been raising capital to bolster its share repurchase programme in an effort to revive investor confidence and stabilise its share price, which has declined 70 per cent from its 2020 peak.
It has spent US$14.7 billion on buy-backs this calendar year, compared with US$9.5 billion in 2023, US$10.9 billion in 2022 and US$10.6 billion in 2021, according to the company’s filings.
“Top Chinese tech companies have ramped up share buy-backs in recent years, mainly driven by steep declines in stock valuations,” Everbright Securities’ Ng said. “Companies are leveraging debt issuance in order to improve shareholder returns.”
Unlike its US$5 billion convertible bond issue in May, Alibaba’s latest offering involves senior unsecured notes, which do not dilute existing shareholders’ equity, according to Hu Yugui of Dolphin Research. He said issuing new dollar-denominated bonds could help Alibaba strengthen its US currency reserves to support share buy-backs and meet other offshore funding needs.
In the September quarter, Alibaba’s revenue rose 5 per cent, while net income surged 58 per cent to more than US$6 billion, driven by robust growth in its cloud computing services and offshore e-commerce operations.
Additional reporting by Aileen Chuang
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