By P.R. Venkat

Alibaba Group Holding plans to raise $4.5 billion through a convertible-bond issue to fund share repurchases, following a similar move by rival e-commerce giant

The convertible senior notes maturing in seven years will carry a coupon of 0.5%, Alibaba said in a filing to Hong Kong's stock exchange Friday. The deal size could reach $5.0 billion if the option to purchase additional notes is exercised in full.

The notes can be exchanged for shares at an initial conversion price of about $105.04 per American depositary share, a 30% premium over Thursday's closing price of $80.80. Alibaba plans to repurchase about 14.8 million ADS.

"We expect Alibaba to continue its shareholder return policy over the next few years," Fitch Ratings said, assigning an A+ rating to the notes. The credit ratings company expects Alibaba to spend $11 billion to $13 billion on share buybacks over the next few fiscal years. Alibaba's fiscal year runs from April to March.

Earlier this week, online retail peer raised $2.0 billion through a five-year convertible bond that could be exchanged for shares at a 35% premium to the company's reference price of $33.85 per ADS.

Alibaba spent a record $4.8 billion buying back its shares in the first three months of 2024 when they touched multiyear lows.

The accelerated pace of buybacks comes as the Hangzhou-based company faces growing e-commerce competition and a sluggish Chinese economic recovery from the pandemic.

"We expect higher pressure on Alibaba's profitability and cash generation in the near term due to continued investments in user experience, user growth, the value-for-money battle and AI as well as driving the business expansion of AIDC and Cainiao," Fitch said.

Alibaba's U.S.-listed shares closed 2.3% lower on Thursday. Its shares in Hong Kong were 0.3% lower by the midday break.

Write to P.R. Venkat at

(END) Dow Jones Newswires

05-24-24 0029ET