Alibaba top brass set to raise $2b via margin loan

A receptionist works at Alibaba's headquarters in Hangzhou, capital of East China's Zhejiang province, Jan 30, 2015. [Photo/Xinhua]

Alibaba Group Holding Ltd Chairman Jack Ma and Vice-Chairman Joseph Tsai are planning to raise more than $2 billion through a margin loan pledged against the company's stock, according to people familiar with the matter.

The money raised may be used to fund Blue Pool Capital Ltd, the family office of Alibaba set up by Tsai, two of the people said, asking not to be named as details are not public. Credit Suisse Group AG, Goldman Sachs Group Inc and Morgan Stanley are among banks working on the transaction, they said.

The loan may be announced as early as this month, after a lockup period on stock owned by Ma and Tsai expires on Sept 21, one of the people said. No final decision has been made and the deal may still fall through, they said.

Both men are billionaires with considerable stakes in Alibaba, which creates a challenge in broadening their personal holdings without panicking Alibaba investors, said Gil Luria, an analyst at Wedbush Securities Inc in Los Angeles.

"Since Tsai said publicly on the last earnings call that he and Ma will not be selling shares at the lockup expiration, this may be their best way for diversifying their personal portfolio without breaking a promise," Luria said.

In a margin loan, a borrower secures a loan by pledging an asset, and typically agrees to hand over cash to the lender if the value of the collateral declines. The lender can usually sell some of the collateral if the borrower is unable to post cash. Banks are keen to do these deals because of the lucrative fees.

Ma has a net worth of $29.4 billion and Tsai of $4.3 billion, according to the Bloomberg Billionaires Index.

"Share financing is very common for founders and senior executives who hold such a strong belief in the future growth potential of their companies," Jim Wilkinson, a spokesman for Alibaba, said on Thursday. "This is prudent financial planning and management."

Representatives for Credit Suisse and Goldman Sachs declined to comment. Officials at Morgan Stanley did not respond to requests for comment.

Shares of China's largest e-commerce company fell in August below their listing price for the first time since the initial public offering in September 2014, and saw their third straight monthly decline amid a global market retreat and concerns about slowing sales growth in China.