Uber takes second run at junk bond market
NEW YORK, Sept 12 (IFR) - Ride-hailing company Uber Technologies seized its chance in a bumper week for issuance, bringing its second US dollar junk bond to fund its planned US$3.1bn acquisition of Middle East competitor Careem.
Strong name recognition no doubt helped the company gather a crowd of investors for the US$1.2bn eight-year non-call three as did a relatively high yield in a junk market that has been printing on occasion sub-4% deals.
The borrower appeared to sacrifice pricing for size after sticking to talk of 7.5% from start to finish, but increasing the deal, rated B3/CCC+, to US$1.2bn from US$750m.
Even so, some investors remain wary of a company that continues to struggle to turn an operating profit, and preferred instead to buy into tried and tested sectors in a week that left the buyside spoilt for choice.
"I just don't know how to value [Uber]," said an investor. "I would rather look at a food company that makes money and you know what will happen."
Uber priced its junk bond debut in October when it issued a US$1.5bn eight-year non-call three at an 8% yield and a US$500m five-year non-call two at 7.5%.
At the time, the tech company drew a crowd of about 50 investors despite it being disqualified from the closely watched ICE BAML indices because it was a private placement with no official ratings.
The private placement (under Section 4(a)(2) of the Securities Act) was unusual, but it allowed Uber to get to market quicker with less documentation and keep its financials tight to its chest.
On this occasion, the company sold its bonds under a more standard 144A for life/Reg S format.
In May, Uber completed its widely expected, but less-than-successful initial public offering, which raised US$8.1bn after it was priced at the low end of the targeted range at US$45 per share.
The stock opened on Friday at US$34.25.
The day before the bond pricing, the company's 8% 2026s closed at 104.00 or a yield of around 7% after a reaching a high this year of 107.75 on July 16, according to MarketAxess data.
The 7.5% 2023s last traded on Wednesday at 103.25 for a yield of 6.336% after reaching a high of 107.25 on June 20.
The deal was led by bookrunners Morgan Stanley, Bank of America Merrill Lynch, Goldman Sachs, Citigroup, Barclays, HSBC, SunTrust and RBC.
(This story will appear in the September issue of IFR Magazine.)
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