Uber said to be pitching US$1.5b junk-bond offering

[NEW YORK] Uber Technologies Inc is sticking to its unorthodox approach to raising capital as it sounds out investors on a US$1.5 billion bond sale.

The ride-hailing company is looking to sell the debt as a private placement available to only a small group of institutional investors, according to people familiar with the matter, who asked not to be named discussing a confidential deal.

By bypassing the broader bond market, the closely-held company is disclosing its financial information to a limited pool of potential investors. Earlier this year, the company took a similar approach when it tapped the leveraged loan market in a financing it led itself.

The bond sale, which may come as soon as next week, is being offered as fixed-income investors have proven receptive to debt deals backed by cash-burning technology companies. WeWork Cos offered its inaugural junk-bond deal in April and Tesla Inc sold US$1.8 billion of notes last year. Tech companies have become the second-biggest issuer of leveraged loans this year, having sold almost US$170 billion, according to data compiled by Bloomberg.

Uber reported a loss of US$891 million in the second quarter. Sales rose 63 per cent to US$2.8 billion in that period compared with a year earlier.

The company may offer US$500 million of five-year notes and US$1 billion of eight-year bonds, according to the people. The shorter-term notes, which the company can't buy back for two years, may yield about 7.5 per cent, and the longer-dated securities, which can't be bought back for three years, may yield around 8 per cent, the people said.

Morgan Stanley is lead placement agent, the people said. Spokesmen for Uber and Morgan Stanley declined to comment. Debtwire earlier reported on the planned offering.

In March, Uber sold US$1.5 billion of loans due 2025, in a rare self-led deal. Morgan Stanley advised the company in that transaction, but didn't arrange or sell the debt. In June, Uber repriced a separate US$1.13 billion term loan due 2023 that it had sold in 2016 so that it pays less than the new loan.

Uber Chief Executive Officer Dara Khosrowshahi has said that Uber is targeting an initial public offering in the second half of 2019. Uber's main rival in the US, Lyft, is planning to go public before Uber, people familiar with the matter have told Bloomberg. Neither company turns a profit and Mr Khosrowshahi has said that Uber may still be losing money when it files to go public.

BLOOMBERG