* E-commerce giant securitises online shopping loans
By Ina Zhou
HONG KONG, Nov 28 (IFR) - Alibaba Group Holding has
now been ramping up its Singles' Day online shopping frenzy for
eight years, but, this time, it has added a new ingredient to
the celebrity-studded extravaganza: securitisation.
Last week, a unit of Alibaba-backed Ant Financial sold 4
billion renminbi ($578 million) securities backed against small
loans granted to consumers on November 11, also known as "Double
11" day. This is a festival that started in Nanjing in the 1990s
to celebrate singlehood, but has since turned into the world's
largest online shopping day.
The enthusiasm spread to the asset-backed securities, which
were well received, despite a liquidity squeeze in the onshore
Although it represented just a small portion of a record
120.7 billion renminbi in sales that day across Alibaba's
platforms, the transaction underlined the financial ambitions of
the e-commerce giant, which is yearning to challenge traditional
banks with its sprawling online credit and banking empire.
Chongqing Alibaba Small Loan provided the underlying loans for
the ABS through an online consumer credit portal, Ant Check
Later ("Huabei" in Chinese), where 604.8 million purchases were
made on November 11.
The portal allows consumers to pay for purchases made on
various e-commerce platforms under Alibaba Group, including
Taobao, one month after orders are delivered. Consumers can also
chose to pay in instalments.
With the Shanghai Stock Exchange's approval, the ABS were
privately placed last Monday to qualified institutional
investors with net assets of over 100 million renminbi and asset
A 1.8 billion renminbi senior A1 tranche, due on December 21
this year, was priced at par to yield 3.35 percent. A 1.624
billion renminbi senior A2 tranche of six months was priced at
3.55 percent, while a 256 million renminbi senior B tranche of
12 months was offered at 4.0 percent. The three senior tranches
scored AAA, AAA and AA- ratings, respectively, from Shanghai
Brilliance Credit Rating & Investors Service.
Chongqing Alibaba Small Loan retained 320 million renminbi
in unrated subordinated tranches as credit enhancement to the
The transaction was launched amid rising onshore rates, but
still managed to close twice oversubscribed.
In the past two weeks, the overnight Shanghai Interbank
Offered Rate, a benchmark for onshore funding cost, jumped over
20bp, forcing dozens of issuers to postpone bond deals.
"The pricing reflected a tighter liquidity condition at the
time of issuance, but the deal still had the support of decent
demand," said a banker with Tebon Securities, the manager on the
Ant Financial is awaiting regulatory approvals for an
investment in Tebon Securities, and domestic newspaper
Securities Times reported that it aimed to hold as much as a 75%
stake in the brokerage.
Prior to the Singles' Day ABS, Chongqing Alibaba Small Loan
had raised a massive amount of funds from securitisation over
the previous three months. Since the first transaction flew in
August, it has issued 24 billion renminbi of securities backed
against consumer loans through Ant Check Later under a 30
billion renminbi ABS programme.
The ABS programme was approved in June for securities
against revolving consumer loans, the banker said, therefore it
did not fit the Singles' Day festival ABS. That was the reason
Alibaba needed to offer new ABS instead of doing another repeat
issue under the 30 billion renminbi programme.
Market participants said Ant Financial's ABS not only
appealed to investors with higher risk tolerance, but also to
"In the stock-exchange market, investors have become
receptive to Ant Financial's ABS," said a banker at another
Chinese securities firm and not involved in the deal. "Even very
conservative investors, like ICBC's asset management department,
participated in its ABS."
While the cash bond market, which state-owned issuers dominate,
does not seem to be ready to embrace the new breed of privately
owned e-commerce companies with high debt ratios, the
securitisation format has proven to be a golden opportunity.
"Alibaba is not likely to achieve cheaper funding costs with
cash bonds than with ABS," said an analyst with China Merchants
Securities. "ABS relies on the quality of underlying assets
rather than the issuer's rating."
Also, Alibaba's foray into securitisation will not stop at
Ant Check Later.
MYbank, an internet lender in which Ant Financial holds a 30
percent stake, is looking to raise 2 billion renminbi through
CLOs in the interbank bond market in December.
The bank, which has no physical branches, offers loans of up
to 5 million renminbi to small and medium-sized Chinese
enterprises that have struggled to obtain credit from major
It was set up last year with registered capital of Rmb4bn.
China Securities and CICC are lead underwriters on MY Bank's
(Reporting by Ina Zhou; editing by Daniel Stanton and Vincent