Uber Technologies Inc. has raised $1.15 billion from a new high-yield loan, according to a person familiar with the matter, as the ride-hailing company stockpiles cash to ward off regulatory and competitive threats around the world.
The new leveraged loan, Uber’s first, brings the amount raised in debt and equity to more than $15 billion and helps its existing shareholder base avoid stock dilution.
Uber will pay a yield of about 5% on the leveraged loan, this person said. The Wall Street Journal first reported last month that Uber hired banks to issue debt of up to $2 billion with a yield of 4% to 4.5%.
The average yield of new leveraged loans ranges from 3.9% to 5.5%, according to data from S&P Global Market Intelligence LCD. First-time issuers typically pay higher yields.
Uber’s loan was arranged by four banks, with Morgan Stanley leading and Barclays PLC, Citigroup Inc. and Goldman Sachs Group Inc. participating, according to the person.
By issuing debt rather than equity, Uber helps its shareholders preserve their stakes in the company. Uber Chief Executive Travis Kalanick has indicated the company is unlikely to go public for at least another year.
Home-rental site Airbnb Inc. last month closed $1 billion in debt from large banks, a person familiar said at the time. The company had last year projected a loss of about $150 million for 2015.
Uber’s $1.15 billion loan amounts to less than 2% of Uber’s equity value, last pegged by investors at $68 billion. If its business started to falter, the company could raise cash by cutting expenses in peripheral markets.
Leveraged loans are a private variant of junk bonds. Banks make the loans to companies with below-investment-grade credit ratings and unload them to professional investors such as mutual funds, hedge funds and insurance companies. Issuers of the loans don’t need to publicly report financial information because the debt is sold privately to investors who are thought to be more sophisticated.