Alibaba to Raise $3.2 Billion Zero-Coupon Convertible Bond to Strengthen International Expansion and Cloud Business

According to Dealogic, this is the largest convertible bond deal of the year, surpassing DoorDash’s $2.75 billion issuance in May.

Alibaba stated that approximately 80% of the proceeds will be allocated for data center expansion, technology development, and meeting cloud service demand. The remaining funds will be used to enhance e-commerce market presence and operational efficiency.

According to the term sheet obtained by Reuters, the bond will be sold with a conversion premium ranging from 27.5% to 32.5% above the market price of the American-listed shares and will mature on September 15, 2032.

Alibaba’s Hong Kong-listed shares are currently up 2.3% at HK$146.1, recovering after a prior 2.6% drop in line with the Hang Seng Index. Meanwhile, the U.S.-listed shares fell 2.2% last Wednesday.

The technology giant has pledged 380 billion yuan ($53.37 billion) in artificial intelligence (AI) investments, which will play a critical role in expanding its cloud revenue over the next three years.

Previously, Alibaba raised $1.5 billion via an exchangeable bond in July and $5 billion through a convertible bond last May.

Globally, demand in the Hong Kong equity capital market for bonds has recently increased because convertible bonds offer the option to convert into shares, pay coupons in some cases, and return principal at maturity. In the Asia-Pacific region, $27.8 billion worth of convertible bonds have been issued so far this year.