Uber Is Said to Be Pitching $1.5 Billion Junk-Bond Offering

(Bloomberg) -- Uber Technologies Inc. is sticking to its unorthodox approach to raising capital as it sounds out investors on a $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 $1.8 billion of notes last year. Tech companies have become the second-biggest issuer of leveraged loans this year, having sold almost $170 billion, according to data compiled by Bloomberg.

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

The company may offer $500 million of five-year notes and $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 percent, and the longer-dated securities, which can’t be bought back for three years, may yield around 8 percent, 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 $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 $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 U.S., Lyft, is planning to go public before Uber, people familiar with the matter have told Bloomberg. Neither company turns a profit and Khosrowshahi has said that Uber may still be losing money when it files to go public.

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