Alibaba Group announces $3.2 billion convertible notes offering

Alibaba Group Holding Limited (NYSE: BABA) announced a proposed offering of approximately $3.2 billion in zero coupon convertible senior notes due 2032 to non-U.S. persons in offshore transactions.

The company plans to use the net proceeds for general corporate purposes, allocating approximately 80% toward enhancing cloud infrastructure capabilities and 20% for expanding international commerce operations, according to the press release.

The notes will be general senior unsecured obligations of Alibaba Group and will mature on September 15, 2032, unless earlier redeemed, repurchased or converted. Upon conversion, the company retains discretion to settle conversions in cash, American Depositary Shares, or a combination of both.

To reduce potential dilution from the notes, Alibaba expects to enter into capped call option transactions with initial purchasers and other financial institutions. These options will effectively increase the conversion price of the notes to a cap price expected to be 60% above the closing price of ordinary shares on the Hong Kong Stock Exchange on the pricing date.

The option counterparties expect to purchase ADSs and ordinary shares or enter into derivative transactions concurrently with or shortly after the pricing of the notes to establish their initial hedges. This activity could affect the market price of the company's securities, though the effect cannot be determined at this time.

The securities have not been registered under the U.S. Securities Act and are being offered under Regulation S. The notes offering is subject to market and other conditions, and there is no assurance the offering will be completed.

Alibaba Group trades on both the New York Stock Exchange and Hong Kong Stock Exchange under symbols BABA and 9988 respectively.

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