Seven more banks -- BNP Paribas, Credit Suisse, DBS, Goldman Sachs, HSBC, ING and Mizuho -- have joined Chinese e-commerce giant Alibaba's $3 billion five-year revolving facility.
Citi, Deutsche Bank, JP Morgan and Morgan Stanley had underwritten the $3 billion facility prior to the company's record-breaking $25 billion flotation in New York in September. These four banks were also bookrunners for Alibaba's IPO alongside Credit Suisse and Goldman Sachs.
After the signing in October, Alibaba's loan was subsequently syndicated out but only to the company's relationship banks. According to a source familiar with the matter, the company wanted the loan facility in place prior to the IPO, which explains why the deal was first underwritten by a smaller group of lenders.
The sources added that there are no financial covenants on the loan, which is rare for a revolving facility extended to an Asian borrower. Lenders often require covenants for revolving facilities and are typically only willing to extend such terms to high-grade US borrowers. The margin for the facility was Libor plus 120 basis points.
A revolving facility offers more flexibility as a company can draw down funds, repay and re-draw loans. The favourable terms reflect the willingness of investment banks to bank Alibaba, the e-commerce giant founded by former English school teacher Jack Ma that has grown at an astounding pace.
Jack Ma's Very Exclusive Club
“Syndication was done in a very clubbed fashion. It was limited to the banks the company wanted to invite. All the banks that were invited responded in a very favourable fashion,” the source familiar with the matter said.
Since it was launched in 1999, Alibaba.com has grown in leaps and bounds. On Wednesday alone it pulled in a total of $9.3 billion in sales through its so-called “Singles Day” annual shopping event.
Alibaba is expected to continue tapping capital markets to fund its fast-growing business. The company has made a slew of acquisitions this year, ranging from stakes in Singapore's postal service SingPost to Guangzhou Evergrande, one of China’s top football clubs.
Earlier this year it made a $1.1 billion offer to buy a 71.1% stake in Chinese digital mapping and navigation company AutoNavi and a $1.2 billion offer to buy an 18.5% stake in online video operator Youku Tudou.
Banks have been keen to bank clients from which they can get ancillary business – be it through M&A advisory work or debt and equity capital raisings.
Lenders were similarly keen to build a relationship with young, fast-growing Chinese smart phone company Xiaomi, which raised $1 billion from its debut loan from 29 lenders.
