HONG KONG -- Alibaba Group raised $5 billion in Asia's largest bond offering in eight months in a sign that investors are growing more sanguine about China's crackdown on the Jack Ma-controlled e-commerce giant.
The bond issue was priced in a way that suggested strong demand, according to people familiar with the situation. However it was still smaller than plans last month for an $8 billion raising.
Alibaba's offering -- the biggest by an Asian company since rival Tencent raised $6 billion in May -- comes a little over a month after China launched an antimonopoly investigation against the group. China also forced the suspension of what would have been the world's largest initial public offering by Ant Group, Alibaba's financial affiliate.
It also comes after weeks in which Ma -- still the public face of the company, although he no longer holds a formal management or board role -- was not seen. Ma resurfaced in January at an online event for teachers.
Sentiment towards Alibaba was also boosted after media reports on Wednesday said Ant Group had agreed with regulators on an overhaul that will turn it into a financial holding company. That could mean it is no longer in regulators' line of fire.
Alibaba's bond also follows the company's latest earnings report on Tuesday, in which it posted a forecast-beating 37% year-on-year increase in revenue and 27% rise in profit for the quarter ended December 2020.
The company is one of a string of big tech groups to have surged in value during the coronavirus pandemic as consumers have flocked to online commerce.
"Investors asked questions about the regulatory environment for Alibaba before putting money in," said one person close to the transaction. "While that was a slight concern, the strength of the company, its market penetration and strong growth potential were more than enough to offset it."
The company is facing an anti-monopoly probe launched on Dec. 24 by China's State Administration of Market Regulation. The agency also imposed the maximum fine of 500,000 yuan ($77,000) twice last month on Alibaba in relation to other investigations.
Alibaba Chairman and CEO Daniel Zhang said in a post-earnings call on Tuesday that he expects the company to be challenged by China's tightening rules on internet platforms.
The conglomerate has been under scrutiny since October, when Ma made a speech that likened traditional banks to pawnshops and labeled the existing financial regulatory framework an "old people's club."
Days later, regulators abruptly stopped Ant from going public. It was expected to raise up to $39.6 billion in a dual listing in Shanghai and Hong Kong.
In Friday's bond issue Alibaba raised $5 billion in a series of tranches with maturities of between 10 and 40 years. Demand exceeded $30 billion, the sources familiar with the issue said, while the spread over U.S. Treasuries was lower than initially guided. A lower spread denotes higher demand for the bond.
"Investor demand was quite strong across the tranches, allowing compression of the spread," one of the sources said.
Alibaba raised $1.5 billion in 10-year notes at 100 basis points over equivalent U.S. Treasuries, $1 billion in the 20-year tranche at 100 points, $1.5 billion in 30-year paper at 120 points and $1 billion in 40-year notes at 130 points, the sources said.
The Initial price guidance for the planned 10-, 20-, 30-and 40-year notes was set at around 130 basis points, 140 basis points, 150 basis points and 160 basis points, respectively.
Proceeds from the bond offering will be used to repay offshore debt, acquire other companies, and enhance working capital, the company said in a regulatory filing.
Alibaba held cash and short-term investments of almost $70 billion as of Dec. 31, much of it onshore in Chinese renminbi, according to its quarterly earnings statement.
Alibaba also increased its share buyback program from $6 billion to $10 billion in December and has been investing in startups as well as pouring money into expansion at home and abroad to parry mounting competition.
This is Alibaba's third dollar bond sale. It first raised a record $8 billion in 2014 shortly after its IPO in New York and raised another $7 billion in 2017.
The latter sale was broken into five sections, with bond durations of 5.5, 10, 20, 30 and 40 years. Bids for the debt exceeded $45 billion and allowed the company to issue notes at a lower interest rate than initially expected.