Alibaba Group, China’s largest e-commerce company, is set to raise up to $5 billion in a dual currency bond offering, with bonds denominated in both US dollars and offshore Chinese yuan.
This move comes as Alibaba aims to capitalize on low interest rates across the Asia-Pacific region and replenish its capital amid a strategic effort to repay debt and fund stock buybacks.
The fundraising plans were confirmed by Alibaba in a regulatory filing on Monday. The company stated that the final terms, including the size, interest rates, and maturity dates of the bonds, would be determined as the deal progresses. If successful, the bond deal would mark the largest corporate bond issuance in the Asia-Pacific region for 2024, according to LSEG data. Alibaba’s last foray into the dollar bond market was in 2021.
According to sources familiar with the matter, the US dollar tranche of the bond deal will consist of three separate bonds with varying maturities: 5.5 years, 10.5 years, and 30 years. In addition, Alibaba is also offering a series of offshore yuan-denominated bonds with maturities of 3.5 years, 5 years, 10 years, and 20 years. The company has already briefed prospective investors about its goal to raise $5 billion from the transaction.
The company intends to use the funds raised from the bond sale for general corporate purposes, including repaying debt and funding ongoing stock repurchase programs. The bond sale also comes as Alibaba ramps up its share buyback efforts. The company has spent over $14.7 billion on buybacks this year, a substantial increase compared to previous years, including $9.5 billion in 2023 and $10.9 billion in 2022.
Low interest rates in Asia and other parts of the world are creating a favorable environment for debt issuance, and many corporations are seizing the opportunity to issue bonds for capital management and investment purposes.
“Low rates provide a strategic opportunity for companies like Alibaba to enhance their capital returns through share buybacks or reinvestment in the business,” stated Lai-yin, a strategist at Everbright Securities International.
Alibaba’s latest financial reports show that as of September 30, 2024, the company had 202.2 billion yuan ($27.9 billion) in bank borrowings and bonds outstanding, marking an 18% increase from March. The company previously raised $5.5 billion through a convertible bond issue in May 2024.
Despite its recent financial struggles and the challenges facing the Chinese tech industry, Alibaba’s bond issuance underscores its ongoing efforts to stabilize its capital structure and return value to shareholders. This new bond offering will further bolster its liquidity as it continues to navigate economic pressures and strengthen its position within the global market.
Reuters and South China Morning Post contributed to this report.
