* Retailer eyes dollar bonds
* Banks suggest pricing can be near eBay's
* Tight deal would bring market full circle
By Christopher Langner
Nov 5 (IFR) - Fresh from buying back a stake from Yahoo!,
Chinese e-commerce group Alibaba is in discussions with banks
ahead of a potential debut US-dollar bond.
The deal is yet to be mandated and Alibaba still has a few
hoops to jump through before it can issue what is expected to be
a SEC-registered bond of at least US$1bn. If bankers have it
their way, however, the deal may emerge before the end of
Alibaba privatised its Hong Kong-listed wholesale arm,
Alibaba.com, and bought back a 20% stake Yahoo! owned earlier
this year in a multi-faceted restructuring that will pave the
way for the eventual listing of the parent company.
While much of the excitement around the group has focused on
the possibility of a record-breaking IPO from Asia's technology
sector, a benchmark bond from China's biggest e-commerce
platform also has the potential to reshape the landscape for
Bankers pitching for the mandate are telling Alibaba it may
be able to price bonds at only a small premium over similar
companies in the US.
If banks on the deal succeed, it would be a watershed moment
for Asia's debt capital markets.
"This would bring the market full circle and more," said a
credit analyst. "At this exact time last year, Chinese bonds
were selling off 20 points. So, if Alibaba manages to eliminate
the China premium, it would be a very interesting turnaround."
Global investors have traditionally demanded big premiums
over US credits to compensate for the lower liquidity on Asian
bonds, but the surging interest in Asian credit markets this
year has allowed a select group of issuers to narrow that gap.
South Korea's Samsung Electronics, for instance, launched a
five-year bond in April at 80bp over US Treasuries. At the time,
the likes of Oracle, Dell and Cisco were trading at spreads
ranging from 35bp to 70bp over, while the Korean agencies were
at spreads closer to 200bp. In pricing almost in line with its
Western peers, Samsung has offered a hint of what may be
possible for Alibaba.
Bankers remained tight-lipped last week about their
discussions with the Chinese group, which generated 2011 Ebitda
of US$965m and was valued at around US$35bn, based on the terms
of the Yahoo buyback. However, one origination banker admitted:
"Everybody is pretty much pitching the same idea [that they can
price without much China premium]."
EYES ON EBAY
To meet that objective, Alibaba would have to print closer
to eBay, the US online marketplace with a similar size and
economics, than to Tencent, so far the only Chinese internet
company to have sold US dollar bonds.
Tencent, rated Baa1/BBB+, has a 3.375% bond due March 2018
trading at around 225bp over US Treasuries, according to Thomson
Reuters pricing. Meanwhile, eBay has bonds due 2022 that were
trading last week at around 70bp over. eBay is rated two notches
higher at A2/A/A.
Pricing a bond inside 100bp over US Treasuries, however,
will be no small task when China's top state-owned enterprises
are well wide of that mark.
Chinese oil major CNOOC, rated higher than eBay at Aa3/AA-,
has 2022 bonds that trade at a spread of 125bp over,
illustrating the premium on Chinese credit. At the same time,
Mexican counterpart Pemex, rated five notches below CNOOC at
Baa1/BBB/BBB, trades at 140bp, a much smaller pick-up than such
a large discrepancy in ratings warrants.
Nonetheless, Samsung's experience suggests that may be
"Instead of taking the deal to the EM portfolio managers in
the largest asset managers, we took that transaction to the
investment-grade guys," said one of the leads on the deal.
The top contenders for the mandate are the eight banks that
signed up to Alibaba's most recent loan, a US$1bn four-year
facility. The eight are ANZ, Barclays, Citigroup, Credit Suisse,
DBS Bank, Deutsche Bank, Mizuho Corporate Bank and Morgan
Stanley. However, only a couple of banks are expected to act as
While a deal size of at least US$1bn is expected, Alibaba's
debut could be much larger if the issuer opts for multiple
tranches to create a full-fledged yield curve in one go.