On November 18th, Science and Technology Innovation Board Daily reported that after issuing $5 billion in convertible bonds for private equity financing in May this year, Alibaba has made another move.
Today (18th), Alibaba released a voluntary announcement and overseas regulatory announcement on the Hong Kong Stock Exchange, announcing its intention to issue senior unsecured notes. This issuance includes senior unsecured notes denominated in US dollars (USD notes) and senior unsecured notes denominated in Chinese yuan (RMB notes).
According to the announcement, the funds raised from Alibaba's issuance of senior unsecured notes will be used for general corporate purposes, including repayment of overseas debts and share repurchases. The specific issuance terms, including principal amount, interest rate, maturity date, etc., will be determined at the time of issuance pricing.
However, it is worth noting that when Alibaba announced its second quarter results for the 2025 fiscal year, there were reports that Alibaba Group planned to raise approximately $5 billion through a dual currency bond issuance. Alibaba did not respond to this matter.
The announcement released today shows that the US dollar notes are sold to persons who are reasonably regarded as qualified institutional buyers in accordance with Section 144A of the US Securities Act and certain non US persons who conduct offshore transactions in accordance with Regulation S of the US Securities Act. At the same time, the company intends to sign a registration rights agreement for the issuance of US dollar bills to facilitate the exchange or resale of the bills.
The RMB notes are sold to certain non Americans who conduct offshore transactions in accordance with Regulation S of the U.S. Securities Law. This issuance of the notes is not registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and this announcement does not constitute an offer to sell any securities or a solicitation to subscribe for any securities in the United States or any other country or region.
Issuing bonds does not mean that Alibaba is short of money, in fact, there is a large amount of money lying in Alibaba's account. According to the latest financial report, as of September 30, 2024, Alibaba's cash and cash equivalents, short-term investments, including equity bonds and other wealth management investments on the consolidated balance sheet, amounted to 554.378 billion yuan, approximately 78.998 billion US dollars.
We are also actively exploring various opportunities for share repurchases, including raising funds. In May, we raised $5 billion in convertible bonds, and in June, we repurchased $5.8 billion. "Alibaba executives said at the latest financial report and performance conference that domestic RMB cash is relatively strong, and there may be greater interest in offshore RMB and USD in financing tools.
Regarding Alibaba's issuance of bonds to repay overseas debts and share repurchases, according to Jiang Han, a senior researcher at Pangu Think Tank, from the perspective of current funding costs, Alibaba's issuance of senior unsecured notes is a relatively low-cost financing method. This financing method helps to enhance the company's financial stability, optimize its capital structure, and reduce debt pressure. Therefore, from the perspective of capital cost analysis, Alibaba's issuance of senior unsecured notes is reasonable.
Huang Lichong, CEO of Huisheng International Capital, stated in an interview with the Science and Technology Innovation Board Daily that priority unsecured notes usually have relatively low financing costs because these notes have a high credit rating and investors have strong confidence in them, thus willing to invest at lower interest rates. Alibaba has chosen to issue priority unsecured notes denominated in US dollars and Chinese yuan. This diversified financing method can provide the company with more financing options and reduce the risks brought by a single financing method.
Huang Lichong further analyzed that by issuing senior unsecured notes, Alibaba can adjust its capital structure, reduce debt costs, and improve financial flexibility. It can also increase the proportion of debt financing for the company, thereby to some extent improving the company's financial leverage effect and increasing shareholder returns.