Uber Pays Less But Offers More to Ravenous Leveraged Loan Market

(Bloomberg) -- Uber Technologies checked all the right boxes with this week’s daring $1.5 billion self-led financing. A company with negative earnings riding through headline risk to borrow more than planned at better terms shows how hot the leveraged loan market is still running.

Investors looked beyond the ride-hailing company’s many challenges to focus on an elevated equity market valuation and a relatively fat yield. The margin was squeezed below the low end of the marketed range, the discount was reduced: Uber bore all the hallmarks of a successful loan syndication.

Crucially, Uber touts a turbo-charged growth rate, which could further boost its market capitalization. On a loan-to-value analysis, the $5 billion in total long-term debt after the new loan is dwarfed by a $54 billion valuation from a recent sale of stock.

And in a frothy U.S. loan market that recently set a fresh low price point of 175 basis points over Libor, Uber seems pretty generous, even at a trimmed 400 basis points spread. New money deals in the broadly-syndicated loan market are pricing below 300 basis points on average and not all have the same hip brand appeal.

The new deal has an 99.5 original issue discount, which compares favorably to Uber’s existing $1.15 billion term loan due July 2023, which is offered at 100.75 and has the same margin.

Uber’s unrated seven-year senior secured term loan has a yield-to-maturity of about 6.4 percent, making it relatively attractive compared to high-yield bonds. Tesla’s $1.8 billion B rated bond due 2025 yields slightly more but is fixed rate and junior.

--With assistance from Lara Wieczezynski

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, Nikolaj Gammeltoft

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