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Uber Is Raising Up to $2 Billion on the Leveraged Loan Market

Uber At $40 Billion Valuation Would Eclipse Twitter And HertzUber At $40 Billion Valuation Would Eclipse Twitter And Hertz
Uber is looking for even more cash.Photograph by Andrew Harrer — Bloomberg via Getty Images

After raising $3.5 billion from Saudi Arabia, Uber Technologies is once again looking for more cash. But instead of turning to equities, the company is taking an unlikely route for startups: It’s heading into the so-called leveraged-loan market for the first time.

The fast-growing startup has hired Morgan Stanley and Barclays to offer a leveraged loan in the range of $1 billion to $2 billion to institutional investors, the Wall Street Journal reported, citing people familiar with the matter.

Leveraged loans are generally more expensive to the borrower, since they often assumes that the lendee already carries a heavy debt and stronger likelihood of default. The loans are similar to junk bonds.

Uber is slated to issue the debt over the next few weeks, but it’s not a done deal yet, the Journal reported. Uber hopes to price the loan with a yield of 4% to 4.5%, according to the Journal, and to make the offerings in the next few weeks. The exact details of the deal are still unclear.

 

Uber has typically raised funds through equity offerings but has tapped into the leveraged loan market this time to avoid diluting existing shares, according to the Journal.

It’s also uncommon for startups to jump into leveraged loans, since many, including Uber, are losing money. That makes them unattractive to lenders, who want to know that borrowers have the cash to pay back their loans.

Uber has been on a fundraising spree to bolster its aggressive push into foreign markets, where it is fighting rivals such as Didi Chuxing in China, Grab in Southeast Asia, and Ola in India for market share. In early June, Uber reported that it had closed $3.5 billion from Saudi Arabia’s Public Fund as part of a $5 billion funding round.

Uber declined to comment for the story.