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A Standard & Poor's Exec Just Explained Why They Gave Alibaba An A+ Credit Rating

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A Standard & Poor's Exec Just Explained Why They Gave Alibaba An A+ Credit Rating
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Alibaba Group Holding Ltd (NYSE: BABA) has become the darling of the Street since its IPO. Rating agencies are now also seeing it as a company that can do no bad. Standard & Poor's recently issued an A+ long-term corporate credit rating for Alibaba’s senior unsecured debt.

Tony Tang, director of corporate rating at Standard and Poor's Ratings Services, was recently on CNBC to discuss the rating issued to Alibaba and the company's future outlook.

"We think Alibaba is a remarkable story of China's e-commerce growth in the last few years and it will continue to be the (proxy) of China’s e-commerce growth in the next few years," Tang said. "And then they have a dominant market position and very high profitability over its competitive peers and then they have highly recognized brand names […] and very minimal financial leverage."

Related Link: The $43 Billion Demand For Alibaba Bonds

When asked about the possible scenarios that can lead S&P to issue a negative outlook for Alibaba, Tang said, "If we think the industry competitive landscape will change dramatically and then the company were [to] lose market dominance and then the company’s profitability could decline to EBITDA margin like say less than 50 percent, then we could downgrade the company. Also if we think the company’s financial leverage will shoot up to 1.5 times that to EBITDA and then we could also downgrade the company."

Tang also added that, "If we think the company’s governance practice will favor the management over other stakeholders, we could react to that too."

Alibaba's shares opened strong on Friday, though started to sell off. Shares were recently trading at $110.76, up 0.8 percent.

Latest Ratings for BABA

DateFirmActionFromTo
Jan 2017BernsteinInitiates Coverage OnOutperform
Jan 2017Standpoint ResearchUpgradesHoldAccumulate
Nov 2016JefferiesMaintainsBuy

View More Analyst Ratings for BABA
View the Latest Analyst Ratings

Posted-In: Tony TangAnalyst Color CNBC Analyst Ratings Media Best of Benzinga

 

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