Alibaba Closes $8 Billion Syndicated Loan Ahead of Possible IPO

Alibaba Group Holding Ltd., which may seek an initial public offering in Hong Kong this year, has closed the general syndication of its $8 billion loan with 13 banks joining, three people familiar with the matter said.

Lenders joining recently in syndication include Bank of China Ltd., Bank of Taiwan, BNP Paribas SA, ING Bank NV, Societe Generale SA and Ping An Bank Co., the people said, asking not to be identified because the details are private.

Alibaba, formed in 1999 as an online marketplace for Chinese companies, has grown as the wave of economic liberalization spurred a boom in manufacturing and trade. It has expanded its workforce to more than 24,000 and added services including cloud computing, online payments and consumer auctions. The Hangzhou-based company’s initial public offering may raise HK$100 billion ($12.9 billion), according to an estimate by Ernst & Young LLP.

China’s biggest e-commerce company is locking in three- and five-year financing, introducing a smartphone operating system and buying a stake in China’s biggest Twitter-like service -- steps considered a prelude to a share sale.

Alibaba Group hasn’t made any decision on the timing or venue of a possible IPO, said John Spelich, a Hong Kong-based spokesman for the company.

Interest Margins

The Hangzhou-based company’s billionaire founder, Jack Ma, said last year that it may go public within five years. Proceeds from the sale would be used along with additional cash to buy back stock held by Yahoo! Inc., a person with knowledge of the matter said last month.

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, the people who spoke today said.

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 U.S. dollar-denominated loans paid by companies in Asia outside Japan averaged 268 basis points this year, according to data compiled by Bloomberg.

Australia & New Zealand Banking Group Ltd., 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.

Loan Proceeds

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, a separate person familiar with the matter said May 2.

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, other people familiar with the matter said earlier this month.

Seven lenders -- Bank of East Asia Ltd., China Citic Bank International Ltd., China Development Industrial Bank Inc., Goldman Sachs Group Inc., Mega International Commercial Bank Co., Royal Bank of Scotland Group Plc and Wing Lung Bank -- have pledged a combined $1.9 billion, people familiar with the matter said on three separate occasions this month.

Alibaba has received $3 billion in pledges in the general syndication for the loan, people familiar with the matter said on June 21. Allocations among the banks are now in process.

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. meanwhile has started marketing a $4 billion two-part loan to back its $4.7 billion bid for Smithfield Foods Inc., the world’s biggest hog producer, in syndication, three people familiar with that matter said today.

The loan, arranged by Bank of China, is part of the $7.9 billion financing package for the buyout.

To contact the reporter on this story: Foster Wong in Hong Kong at fwong94@bloomberg.net

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

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