Alibaba Funding Plans Taking Shape

Details are emerging for Alibaba’s proposed funding for its buyback of the 40 percent held in it by Yahoo Inc. (NASDAQ:YHOO). Originally planning to raise $4 billion, Alibaba will probably raise only $3 billion through its debut loan, with the balance coming from internal accruals. Alibaba did not comment, while the sources for the above information declined identification.

Alibaba will be raising the funds in a tighter financial environment with European banks keeping a low profile on overseas lending as they streamline their balance sheets. The funding, through a holding company route, is also slightly more difficult as banks prefer to lend directly to an operating company with a lien on the cash flows for repayments of the loan.

However, as the loan amount has reduced, there could be the possibility of more lenders entering the fray. Rothschild is advising Alibaba on the debt funding.

Here’s how shares of YHOO are reacting to the M&A news:

Yahoo! Inc. (NASDAQ:YHOO): YHOO shares recently traded at $15.54, up $0.03, or 0.19%. They have traded in a 52-week range of $11.09 to $18.84. Volume today was 8,497,004 shares versus a 3-month average volume of 23,365,900 shares. The company’s trailing P/E is 19.02, while trailing earnings are $0.82 per share.