Goldman Said to Pledge $500 Million to Alibaba as IPO Looms

Goldman Sachs Group Inc. will lend $500 million to Alibaba Group Holding Ltd. as the company seeks $8 billion of loans, two people familiar with the matter said.

The pledge by the New York-based bank forms part of a facility that will cut debt costs for China’s biggest e-commerce company, the people said yesterday, asking not to be identified because the details are private. Edward Naylor, a spokesman for Goldman Sachs in Hong Kong, declined to comment.

Alibaba is locking in three- and five-year loan financing, introducing a smartphone operating system and buying a stake in China’s biggest Twitter-like service -- steps considered a prelude to an initial public offering that may value the company at as much as $100 billion. Investment banks are keen to form relationships with Alibaba to increase their chances of being selected to help with the share sale.

“Goldman Sachs wants to use this as an opportunity for further chances of cooperation,” including the IPO, said Alex Wang, a Beijing-based analyst at Internet consulting group iResearch. “These banks might not come across a chance like this in years.”

John Spelich, a Hong Kong-based spokesman for Alibaba, said he had “no comment on speculation regarding who may have joined the syndication” when asked about the company’s financing plans.

Photographer: Nelson Ching/Bloomberg

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou, Zhejiang Province, China. Alibaba was formed in 1999 as an online marketplace for Chinese companies. Close

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou, Zhejiang Province,... Read More

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Photographer: Nelson Ching/Bloomberg

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou, Zhejiang Province, China. Alibaba was formed in 1999 as an online marketplace for Chinese companies.

Debt Split

The debt is split into a $4 billion five-year term loan, a $2.5 billion three-year term facility and a $1.5 billion similar-maturity revolving credit line, according to the people. The financing offers interest rates of 225 basis points more than the London interbank offered rate for the three-year portions and 275 basis points for the five-year loan, the people said.

Margins for dollar-denominated loans paid by companies in Asia outside of Japan averaged 249 basis points this year, according to data compiled by Bloomberg.

Australia & New Zealand Banking Group Ltd. (ANZ), Citigroup Inc., Credit Suisse Group AG, DBS Bank Ltd., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., Mizuho Corporate Bank Ltd. and Morgan Stanley were hired to help arrange the loan and have been marketing it to a wider group of banks in syndication.

Goldman Sachs is the top-ranked arranger of global equity offerings this year with a 13 percent market share, according to data compiled by Bloomberg. Citigroup is ranked second with an 8.7 percent share, followed by Morgan Stanley with 7.9 percent, the data show.

Mobile Strategy

Alibaba, led by Chief Executive Officer Jonathan Lu after billionaire founder Jack Ma stepped down last month, is refocusing on mobile platforms to replicate its dominance with desktop computer users.

The Hangzhou-based company was formed in 1999 as an online marketplace for Chinese companies. It doesn’t sell merchandise itself, instead running platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers, a cross between Amazon.com Inc. and EBay Inc. (EBAY) It makes most of its sales from commissions and advertising.

Goods sold on Alibaba -- ranging from consumer staples to cement and aluminum -- were worth $180 billion last year, according to Eric Qiu, an analyst at Guosen Securities Co. in Hong Kong.

Alibaba will use $4.8 billion of the loan proceeds to refinance debt, $800 million to buy back preferred shares from Yahoo! Inc., and the rest for corporate purposes, another person familiar with the matter said May 2.

All-In Rates

The borrower is paying so-called blended all-in rates of 314 basis points, 307 basis points and 300 basis points more than Libor for pledges of $500 million, $300 million and $200 million respectively, the people familiar with the matter said yesterday.

The syndication deadline is expected to be extended by about two weeks from June 7 to give banks more time to process credit approvals, a person familiar with the matter said today. Some 30 lenders were invited by the nine lead arranging banks to join the deal, the person said.

An $8 billion facility would be the biggest syndicated financing in the Asia-Pacific region outside Japan this year, according to data compiled by Bloomberg. Cnooc Ltd. (883), China’s largest offshore energy explorer, signed a $6 billion short-term bridge facility in February, which was used to buy Canadian energy producer Nexen Inc., the data show.

Shuanghui International Holdings Ltd. is lining up about $7 billion in loans from two banks to back its $4.7 billion bid for Smithfield Foods Inc., the world’s biggest hog producer, a person familiar with the matter said yesterday.

Bank of China Ltd. is providing a term loan of about $4 billion to pay for the cash component of the takeover while Morgan Stanley, Shuanghui’s financial adviser, will provide about $3 billion to refinance Smithfield’s existing debt, that person said.

To contact the reporters on this story: Foster Wong in Hong Kong at fwong94@bloomberg.net; Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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