Alibaba Said to Offer All-in Rate of Up to 600 Basis Points

Alibaba Group Holding Ltd. is offering to pay a blended all-in rate of as much as 600 basis points more than the London interbank offered rate on $3 billion of loans, according to a person familiar with the matter.

The two-part borrowing, signed last week, pays a blended margin of about 475 basis points more than Libor, the person said, asking not to be identified because the details are private. Alibaba Group may pay at least 525 basis points for the blended all-in rate, which takes into account margins and fees on both tranches, the person said.

The facility, the proceeds of which will be used to take the borrower’s Hong Kong-listed unit, Ltd., private, will be split into $2 billion of one-year borrowing and a $1 billion three-year amortizing loan, the person said. The loans have a combined average life of 1 1/2 years, the person said.

Alibaba Group, run by billionaire Jack Ma, offered HK$13.50 ($1.74) a share for the 27 percent it doesn’t already own in, according to a Feb. 21 regulatory filing to the Hong Kong Stock Exchange. Ma is seeking to buy out minority shareholders four years after a $1.7 billion initial public offering as the unit warned of slowing earnings growth tied to a change in strategy.

John Spelich, a Hong Kong-based spokesman at Alibaba, declined to comment on the loan’s pricing when contacted at his office today.

Ma is in separate negotiations with Yahoo! Inc. to buy the 40 percent stake the U.S. company owns in closely held Alibaba Group.

Alibaba Group signed the loan to finance the planned deal with arrangers Australia & New Zealand Banking Group Ltd., Credit Suisse Group AG, DBS Bank Ltd., Deutsche Bank AG, HSBC Holdings Plc and Mizuho Corporate Bank Ltd., according to the Feb. 21 filing.

Marketing to a wider group of banks in syndication has begun, and lenders invited to join in the senior phase are being asked to commit at least $100 million to $300 million, the person said today.

Alibaba has multiple options to repay the $2 billion portion, including using cash, possibly channeled through dividends, the person said. It may also use proceeds from a bond sale, or more loans, the person said.

The new financing will boost Alibaba Group’s debt to a maximum of 1 1/2 times dividends, the person said.

An amortizing loan is one where the principal of the loan is paid down over the life of the facility, according to some amortization schedule, typically through equal payments.

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