Morgan Stanley's Road to Uber IPO Began With Controversial Deal
Morgan Stanley led the bank group that arranged Uber’s first foray into junk debt markets in 2016.
(Bloomberg) -- Morgan Stanley is reaping the rewards of steering Uber Technologies Inc. through numerous debt deals on a road that was at times dicey.
The Wall Street bank was selected by Uber to lead its public offering next year. What probably gave Morgan Stanley the edge was that it helped the company sell its first high-yield bonds and loans -- and at no small risk to itself.
Morgan Stanley led the bank group that arranged Uber’s first foray into junk debt markets in 2016. That wasn’t the smoothest of rides: banking supervisors determined that the $1.15 billion term loan ran afoul of particular guidance leveraged loan bankers were supposed to follow. Uber’s lofty valuation and small debt burden weren’t enough to convince regulators that lending to a company with no earnings was sound, and Morgan Stanley got a slap down.
But when Uber sought to come back to the loan market for $1.5 billion earlier this year, an undeterred Morgan Stanley took the helm again. This time around, it acted as an adviser rather than a traditional arranger, a role less likely to incur such regulatory wrath. That move led other banks to fume about what they deemed Morgan Stanley’s workaround, after they balked at doing the riskier deal themselves. Morgan Stanley returned just in October, to spearhead Uber’s $2 billion high-yield bond sale.
Overall, the journey paved the way to ultimate prize- the lucrative rewards of leading an IPO for a company valued at an estimated $120 billion. Of course, this isn’t to detract from efforts by Morgan Stanley banker Michael Grimes, who became the go-to adviser for many of Silicon Valley’s largest IPOs. Grimes famously moonlighted as a driver for the ride-hailing service.
Representatives for Morgan Stanley and Uber declined to comment.
To contact the reporter on this story: Lisa Lee in New York at llee299@bloomberg.net
To contact the editors responsible for this story: James Crombie at jcrombie8@bloomberg.net, Sally Bakewell, Dawn McCarty
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