Jack Ma tests China concerns with Alibaba bond issue

Jack Ma Yun had to play down Alibaba Group Holding's China roots during a world-record initial public offering. Now he is due to test confidence in the state-dominated economy with Asia's biggest US dollar bond sale.

The internet giant, which Ma said in September just "happens to be in China", may pay a yield premium on the planned US$8 billion issue that is higher than developed-market peers, according to Bank of New York Mellon. Concerns that corporate governance and disclosure in China are lagging those in developed markets have forced investment-grade mainland issuers to pay 15 basis points more on average than their Asian peers this year to sell notes, Bank of America Merrill Lynch indices show.

Ma, the mainland's richest man, has tried to overcome criticism of Alibaba's corporate governance structure, which gives 30 individuals the ability to nominate a majority of the board, and sought to burnish its image in meetings with US chief executives and former US president Bill Clinton. Shares sold in the US$25 billion listing on September 18 have jumped 63 per cent and attracted investors including Soros Fund Management, Fidelity Investments and Third Point.

"Alibaba is a unique case as it has a US listing and it has enormous market visibility after the [flotation]," said Jon Pratt, managing director and head of Asia-Pacific debt capital markets at Barclays, the fourth-biggest arranger of bonds in the US. "They should be able to attract many first-time investors into China credit from US high-grade buyers and they have the ability to re-price the Chinese credit curve."

Alibaba's bond sale could help lower yield premiums for other mainland issuers by helping international investors become more familiar with their offerings, Pratt said.

The mainland e-commerce giant was planning the note to refinance existing debt, a company spokesman said on Tuesday.