Alibaba’s $5 Billion Bond Sale Shows Jack Ma Fans Still Believe

(Bloomberg) — Alibaba Group Holding Ltd. drew robust orders for a $5 billion bond sale, demonstrating investor confidence in the e-commerce giant’s long-term prospects amid easing tensions with Chinese regulators.

The four-tranche offering attracted more than $38 billion of orders at the peak, according to people with knowledge of the matter. The notes comprising 10-year, 20-year, 30-year and 40-year maturities were priced at 30 basis points to 40 basis points lower than initial guidance, as measured in yields above comparable Treasuries, said the people, who aren’t authorized to speak publicly. A basis point is a hundredth of a percentage point

The robust demand helped Alibaba secure relatively cheap borrowing costs. The spreads on some comparable notes sold by Amazon.com Inc. in June tightened by around 20 basis points from initial pricing. Thanks to a decline in U.S. interest rates, Alibaba also fetched lower coupons on each of its new notes compared with those of the same tenors sold in 2017.

The new dollar debt sale is the biggest in Asia since a $6 billion issuance by rival Tencent Holdings Ltd. in May. It comes amid growing expectations that Jack Ma’s tech empire may have avoided the worst-case scenarios — which had ranged from a government-led takeover to a breakup of his companies — after the billionaire entrepreneur briefly returned to public sight last month and as Ant Group Co. Ltd. began its lengthy overhaul process. Washington’s decision to drop deliberations of an investment ban on the company and Alibaba’s consensus-beating quarterly sales performance also helped ease concerns.

“Alibaba bonds have been well received in the market, with pricing having tightened significantly from its initial guidance,” said Chang Wei Liang, a macro strategist at DBS Bank Ltd. in Singapore. “Approval of Ant’s restructuring plan has reduced uncertainty over the regulatory environment, which contributed to greater appetite for Alibaba’s new issuance.”

Alibaba’s existing dollar notes and its shares rose Thursday after Bloomberg reported that affiliate Ant Group and Chinese regulators agreed on a restructuring plan that will turn Jack Ma’s fintech giant into a financial holding company. While this would make Ant subject to capital requirements similar to those for banks, analysts say the agreement suggests it’s now less likely to have to spin off portions of its businesses. Meanwhile, Reuters reported that Ant may split off its consumer data operations, a concession to regulators that may enable the company to revive plans for an initial public offering that was abruptly halted in November.

Alibaba owns roughly a third of Ant. Chief Executive Officer Daniel Zhang told analysts Tuesday that the company was unable to assess the impact of the company’s ongoing restructuring on its business, though he said only “a very small percentage” of Ant’s credit plans are involved in payments on its marketplaces. The online retailer, which is facing its own antitrust investigation, set up a special task force to conduct internal reviews and is actively communicating with antitrust regulators on complying with their requirements, Zhang said.

The company reported a stronger-than-expected 37% increase in quarterly sales Tuesday, saying it plans to continue investing for long-term growth in areas like cloud and artificial intelligence.

“Alibaba has multiple growth drivers in the years ahead,” Jefferies analyst Thomas Chong wrote in a note after the earnings report.

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