Uber Raises $1.15 Billion From First Leveraged Loan

Uber Technologies Inc. has raised $1.15 billion from a new high-yield loan, according to a person familiar with the matter, as the ride-hailing company stockpiles cash to ward off regulatory and competitive threats around the world.

The new leveraged loan, Uber's first, brings the amount raised in debt and equity to more than $15 billion and helps its existing shareholder base avoid stock dilution.

Uber will pay a yield of about 5% on the leveraged loan, this person said. The Wall Street Journal first reported last month that Uber hired banks to issue debt of up to $2 billion with a yield of 4% to 4.5%.

The average yield of new leveraged loans ranges from 3.9% to 5.5%, according to data from S&P Global Market Intelligence LCD. First-time issuers typically pay higher yields.

Uber's loan was arranged by four banks, with Morgan Stanley leading and Barclays PLC, Citigroup Inc. and Goldman Sachs Group Inc. participating, according to the person.

Uber is getting more creative in seeking out unorthodox sources of capital to fuel its rapid global expansion. The debt deal comes a month after the company closed a $3.5 investment from Saudi Arabia's sovereign-wealth fund, part of the single-largest injection into a venture-backed company of all time.

Uber's diverse investor sources include venture-capital firms like Benchmark, mutual funds such as Fidelity Investments, and the Saudi and Qatari governments. The startup last year worked with Goldman Sachs Group Inc. to raise $1.6 billion in convertible debt from the bank's wealthy clients.

By issuing debt rather than equity, Uber helps its shareholders preserve their stakes in the company. Uber Chief Executive Travis Kalanick has indicated the company is unlikely to go public for at least another year.

Startup technology companies rarely tap the leveraged-loan market because institutional investors usually reject borrowing requests from companies like Uber that lose money. Unlike stock pickers, who often buy on expectations of growth, debt investors focus on a company's ability to generate the cash it needs to repay obligations.

Home-rental site Airbnb Inc. last month closed $1 billion in debt from large banks, a person familiar said at the time. The company had last year projected a loss of about $150 million for 2015.

It is unclear how quickly Uber is burning through cash. The company spends millions of dollars to attract riders and drivers, especially in less-established markets. It offers cash bonuses to new drivers and subsidizes the cost of lower-price rides. It has said it is profitable in its most developed markets.

Uber also has been pouring funds into China, where it is engaged in fierce competition with the country's largest ride-sharing company, Didi Chuxing Technology Co. Didi last month said it raised $4.5 billion in a fundraising round from investors, and added $2.8 billion in debt financing. The company was valued by investors at about $28 billion.

Uber's $1.15 billion loan amounts to less than 2% of Uber's equity value, last pegged by investors at $68 billion. If its business started to falter, the company could raise cash by cutting expenses in peripheral markets.

Leveraged loans are a private variant of junk bonds. Banks make the loans to companies with below-investment-grade credit ratings and unload them to professional investors such as mutual funds, hedge funds and insurance companies. Issuers of the loans don't need to publicly report financial information because the debt is sold privately to investors who are thought to be more sophisticated.

Maureen Farrell and Matt Wirz contributed to this article.

Write to Douglas MacMillan at [e-mail]

(END) Dow Jones Newswires

July 07, 2016 20:55 ET (00:55 GMT)

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