UBER Technologies is tapping the US investment-grade bond market for the first time since it attained blue-chip status.
The ride hailing service is looking to sell the bonds in as many as three parts, according to a person with knowledge of the matter. The longest portion of the offering, a 30-year security, may yield 1.6 percentage point above Treasuries, said the person, who asked not to be identified as the details are private.
The deal size is expected to be about US$3 billion, after early indications of demand reached about US$8 billion following investor calls on Tuesday (Sep 3), according to people with knowledge of the matter. The size of the offering is subject to change. Morgan Stanley, BofA Securities and JPMorgan Chase are managing the bond sale.
Uber did not immediately respond to a request for comment. Representatives for BofA, JPMorgan and Morgan Stanley declined to comment.
The deal will likely receive a warm reception from bondholders, most of whom have little or no exposure to the credit, according to Bloomberg Intelligence analyst Robert Schiffman. The company’s record profitability in the second quarter, double-digit bookings and top-line growth, further adds to the appeal, he added.
“We anticipate massive demand for Uber’s inaugural investment-grade debt issuance,” said Schiffman. “Rapidly improving free cash flow trends should continue to propel Uber’s ratings higher over the next few years.”
Uber intends to use the proceeds from the offering to repay about US$1.97 billion of outstanding loans as of the end of June and to use the remainder to redeem US$1.5 billion worth of 8 per cent senior notes due 2026 and for general corporate purpose, said the people.
The company’s credit rating was first upgraded on Aug 16 to BBB- by S&P Global Ratings from BB+, then to BBB by Fitch Ratings a few days later, and on Aug 27 was raised to investment grade at Moody’s Ratings. BLOOMBERG
