(Bloomberg) -- Alibaba Group Holding Ltd.'s dollar bonds rallied in Asian trading after the biggest Chinese corporate offering of 2017 attracted $46 billion in orders, more than six times the deal size.
The $7 billion deal eclipsed China Evergrande Group's $6.6 billion offering in June to become the biggest sale in Asia from a non-bank issuer, according to data compiled by Bloomberg. The spread on the 4.2 percent 30-year tranche narrowed to around 130 basis points from final pricing of 138 basis points in early morning Asian trading, according to traders.
“Alibaba bonds should trade up and stay up in the secondary market on generous spreads,” said Steve Wang, a senior credit analyst at CITIC CLSA Securities in Hong Kong. “Alibaba has now completely built out a yield curve ranging from 2-to-40 years, which will serve as key benchmark for keen Chinese issuers, particularly ones from the tech sector.”
The Chinese e-commerce giant sold the notes in five parts, with maturities of 5.5, 10, 20, 30 and 40 years. Investor orders on the deal reached $46 billion, according to people familiar with the offering, who are not authorized to speak publicly and asked not to be identified. Following Alibaba, Tencent Holdings Ltd., China's largest company by market cap, is in talks with banks for a dollar bond sale, according to people familiar with the matter Wednesday.
The new bond sale comes after Alibaba struck a $2.9 billion deal earlier this month to buy a slice of China's largest hypermart chain Sun Art Retail Group Ltd. to pit it against Wal-Mart Stores Inc. in the world's largest retail market.
Record Maturity
The longest portion of the offering, $1 billion of 4.4 percent 40-year bonds, yields 1.58 percentage point over comparable government debt. That's down from early talk from underwriters of around 1.8 percent.
It's the longest maturity on record from a Chinese corporate issuer, according to data compiled by Bloomberg. Four of five of the bonds sold by Alibaba on Wednesday were indicated tighter in Asian trading.
“Alibaba can afford to pay a bit more for longer-dated funding,” Anthony Leung, director of Asia-Pacific credit research at Wells Fargo Securities LLC in Hong Kong, said before the final pricing of the deal.
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Market Tops $300 billion
China's second-biggest company by market value, founded by billionaire Jack Ma, raised $8 billion in its first bond sale in 2014, which remains the largest U.S. dollar-denominated issue by any firm in Asia outside of Japan. It exchanged the notes for new debentures in 2015.
Morgan Stanley, Citigroup Inc., Credit Suisse Group AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. managed the sale.
Alibaba's deal pushed dollar-bond issuance from borrowers in Asia outside of Japan to more than $300 billion so far this year, an all-time high, compared with about $186 billion for all of 2016, according to data compiled by Bloomberg.
The spread on the Hangzhou-based firm's 2024 notes still trade wider than those of U.S. peers such as EBay Inc., which has a lower rating from S&P Global Ratings.
Alibaba also obtained a $5.15 billion five-year revolving credit facility in April.
--With assistance from Dan Wilchins and Brian Smith
To contact the reporters on this story: Lianting Tu in Hong Kong at ltu4@bloomberg.net, Carrie Hong in Hong Kong at chong61@bloomberg.net, Claire Boston in New York at cboston6@bloomberg.net.
To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, Finbarr Flynn, Beth Thomas
©2017 Bloomberg L.P.
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