Startups & Tech

Grab's planned IPO will erase its 2023 refinancing risk: S&P

Published Thu, Apr 15, 2021 · 09:35 AM

GRAB'S planned initial public offering (IPO) and its expected US$4.5 billion cash proceeds will eliminate its 2023 refinancing risk, said S&P Global Ratings.

In a press statement on Wednesday, the credit ratings agency noted that Grab's 2023 maturity wall, which comprises convertible redeemable preference shares, will fall away with a public listing as the redemption rights of the bondholders are converted into equity.

Grab has heavily relied on funding from investors in the form of convertible securities, from which the company raised almost US$10 billion since 2014. According to S&P, the estimated proceeds from Grab's IPO and special purpose acquisition company (SPAC) merger could provide it with additional funds to buffer cash burn, support future expansion, and lower existing debt.

Despite the optimism, S&P believes that Grab will continue to be loss-making over the next two years. It noted that the ride-hailing company currently has a currency mismatch between its debt, which is predominantly in US dollars, and its operating cash flows, which are mostly in Asia-Pacific currencies.

S&P is maintaining its "B-" rating on expectations that Grab will implement growth strategies to achieve higher profitability and positive free operating cash flow by 2023.

"Given the merger with a SPAC and onboarding of new investors, it's possible that GHI's long-term financial policies will change, including leverage tolerance and dividend policy. A material deviation from our expectations may affect our credit assessment," the agency said.