After record IPO, Alibaba eyes first bond sale, likely to be one of the five largest this year

The logo of the Alibaba Group is seen inside the company's headquarters in Hangzhou, Zhejiang province on Nov 11, 2014. -- PHOTO: REUTERS
The logo of the Alibaba Group is seen inside the company's headquarters in Hangzhou, Zhejiang province on Nov 11, 2014. -- PHOTO: REUTERS

NEW YORK (Reuters) - Chinese e-commerce giant Alibaba will sound out investors next week in Asia, Europe and the US in a plan to raise as much as US$8 billion in its first ever bond sale, just two months after the company's record-breaking IPO.

Alibaba, which this week logged US$9 billion of sales on a single day, will kick off a roadshow in Boston and Hong Kong on Monday for what will surely be one of the most sought-after bond offerings of the year.

It hired Morgan Stanley, Citigroup, Deutsche Bank and JP Morgan to arrange the meetings, which continue in New York and Singapore on Tuesday and London on Wednesday.

"Everyone will want this," one market participant told IFR."It's a first-time borrower, it's high quality and it's a marquee name. This is a great global story."

Founded by Jack Ma in the late 1990s, Alibaba Group has become a powerhouse player in the global economy, highlighted by its stunning results on China's Singles' Day on Tuesday.

It reported sales of 57.1 billion yuan (US$9.3 billion) on the day, conceived as a response to Valentine's Day in the West and now akin to Black Friday and Cyber Monday in the United States.

"What Alibaba as a company is doing is important and exciting for global commerce," said Matthew Duch, senior portfolio manager at Calvert Investments. "They are tapping the holy grail of retail, the Chinese consumer."

Moody's has assigned an A1 credit rating to the proposed bond, which will only increase the appeal of the deal for investors already enamored with the company's success story.

"The overhang around Chinese companies is what can and can't be trusted in the financials," said Duch. "Alibaba is going a long way to build confidence and credibility in Chinese companies."

Less than two months ago, Alibaba wowed the global markets with the largest IPO of all time, a whopping US$25 billion listing in New York that sold at US$68 per share.

Its stock is up nearly 75 per cent since then, closing at US$118.20 on Wednesday - giving Alibaba Group a market capitalization of US$289 billion, even bigger than US retail giant Walmart.

Bankers told IFR that Alibaba is expected to sell about US$8 billion of bonds, which would make it one of the five largest bond deals of the year.

It is unusual for large publicly listed companies to undertake big debt sales so soon after an IPO, which highlights Alibaba's appeal as a gateway into the vast Chinese market.

"The fact that Alibaba is going to issue a large transaction on the back of its highly successful IPO in the equity market will continue the positive momentum and interest in the Chinese retail market," said Duch at Calvert.

Proceeds are expected to be used to repay an existing US$8 billion syndicated term loan facility that has been fully drawn down, Fitch Ratings said.

There tend to be much tighter restrictions attached to loans than to bonds, meaning Alibaba should have even greater freedom in the financing of any future expansion plans.

Ma, Alibaba Group's chairman and now one of the richest men in the world, has indicated that he may seek an IPO for sister company Alipay, an online payment platform, in 2015.

The new bond will also mark a significant success for the four banks underwriting it, who were selected after what sources said was an exceptionally competitive process.