The rating agency publishes the coverage of the Chinese e-commerce giant, appreciating the dominant position on the market, a business model with low risk and the ability to generate plenty of liquids.
Decisive in this evaluation were the observations on market dominance of online shopping, the ecosystem in growth, as well as a business model with low risk and able to monetize. They have also been considered decisive market opportunities, sustainable profitability called “robust” and also a “hearty” ability to generate liquid.
Moreover, in its report Fitch explained how even the large size and the potential for sustainable growth of Alibaba on the Chinese e-commerce market play as beneficial factors to mitigate its limited geographical heterogeneity. The rating agency also expects Alibaba maintained in the future, thanks to its flexible business model, high profitability and a consistent ability to generate cash.
The offer proposal comes two months after the debut of the Chinese company on Wall Street, in what was the largest IPO in history. Alibaba announced on Thursday it was ready to issue bonds with principal amount, interest rate, maturity dates and other conditions, defined in US dollars, to be determined at the time of pricing offer. Alibaba plans to use the net proceeds of the offer to refinance its existing credit facilities.
Rating agencies may grant an upgrade if Alibaba will be able to develop new activities to diversify cash generation other than those exposed to regulatory risks and the Beijing government; it could instead get a negative rating in the event of a major decrease in cash flow, operations “mergers and acquisitions” (M&A) that impact negatively the activities and in case of evident government intervention.