LOANS: Alibaba facility size increase to US$4bn likely
Source: Reuters/Jason Lee
Chairman and chief executive of Alibaba Group Jack Ma attends a news conference in Beijing
The US$3bn dual-tranche loan for Alibaba Group to back its privatisation of Hong Kong-listed Alibaba.com is likely to be increased to US$4bn.
The move follows the group’s announcement today of a buyback of half of the 40% stake Yahoo holds in the Chinese e-commerce giant. The buyback will cost US$7.1bn, which will be funded with US$6.3bn in cash and US$800m through Alibaba Group’s new issue of preferred stock to Yahoo.
The company announced that the US$6.3bn cash portion will be a combination of cash, debt, equity and equity-linked funding.
People familiar with the situation said the US$3bn loan would be increased to US$4bn after an overwhelming response with 14 banks, other than the six original underwriters, committing US$2.5bn in syndication.
The US$3bn loan is split into a US$1bn three-year term facility A and a US$2bn 12-month bridge facility B.
Facility A was likely to be increased by US$1bn, sources said. However, this will require approval from all the banks participating in the financing.
As the six original MLAs and bookrunners – ANZ, Credit Suisse, DBS Bank, Deutsche Bank, HSBC and Mizuho Corporate Bank – have signed the US$3bn loan agreement, Alibaba Group can complete the formalities for the privatisation of Alibaba.com. A vote on the privatisation would take place this week with the group aiming for an end-June timeline for the delisting, said one source.
The documentation on the US$3bn loan is being updated to make changes to the covenants to accommodate for the increased size.
Alibaba.com’s privatisation will cost US$2.5bn, which means that, if the loan size is increased to US$4bn, Alibaba will use the remaining US$1.5bn partially to pay for the buyback of the Yahoo stake.
Alibaba is also said to have also been in discussions with Chinese lenders to refinance the US$2bn 12-month bridge facility B.
As reported earlier, facility A offers a margin of 450bp over Libor, while the opening margin on the bridge is 350bp over Libor. The bridge’s margin steps up after the sixth and ninth months, translating to a blended margin of 481bp over Libor.
The blended margin across both facilities is 460bp over Libor with a blended average life of around 1.5 years. Facility A has an average life of 2.5 years.
Banks were invited at three ticket levels to commit to either of the tranches or on a pro rata basis.
MLAs and bookrunners committing US$300m or above received a 300bp top-level upfront fee on term facility A and 175bp on bridge facility B.
The blended fees worked out to 217bp, 183bp and 150bp for the three ticket levels, with blended all-ins amounting to 604.67bp, 582bp and 560bp, respectively.
Assuming lenders only committed to facility A, the all-ins worked out to 570bp, 550bp and 530bp, respectively.If lenders came into facility B only, the all-ins worked out to 656bp, 631bp and 606bp, respectively.
