NEW YORK (LPC) – Uber Technologies’ self-arranged B-term loan was raised to $ 1.5 billion, justifying the taxi app company’s unconventional approach to raising the loan and succeeding despite the announcement that one of the company’s self-driving cars had killed a pedestrian.
The revolutionary seven-year new money loan was placed with investors directly through Uber’s capital markets team, rather than through a syndication process led by the host banks, and at an equally tight price.
Much of it was a bridging loan designed to fund Uber’s heavy cash consumption until its scheduled IPO in 2019, and which also required investors to familiarize themselves with unusual credit measures, including negative EBITDA.
The Uber car struck and killed Elaine Herzberg in Arizona late March 18, in what would be the first fatality involving an autonomous vehicle.
News of the crash emerged the next day, and Uber moved its loan commitment deadline forward to March 21 compared to the original March 22 deadline.
Uber has always been able to capitalize on strong investor demand, and the deal has increased by $ 250 million, up from $ 1.25 billion at launch.
After the crash, Uber said it would end the autonomous driving program in Arizona, Pittsburgh, San Francisco and Toronto and continue to help local, state and federal authorities as concerns spread through the crash. ‘automobile industry.
The proceeds have been earmarked for general corporate purposes – a generic use that includes investing in autonomous vehicle technology, the investors said.
“I guess hindsight [in that investment] will be temporary, ”said one investor.
Another investor said, “I don’t think death changes anything. Six thousand pedestrians are killed each year. People think, if it all falls apart, will someone buy this losing trade for more than my loan balance? “
The loan eventually cleared at 400bp with a Libor floor of 1% to 99.5, against an opening guidance of 425bp-450bp above the Libor range with a floor of 1% and an OID from 99.
WITHOUT LEVER
The direct placement strategy was intended to avoid attracting the attention of U.S. banking regulators, as the loan could violate leveraged lending guidelines. The rules raise concerns about transactions with a debt-to-Ebitda ratio greater than six times or transactions that cannot be reimbursed in half with cash flows over five to seven years.
Uber reported an Ebitda of around US $ 2 billion in 2017, according to two sources, leaving potential investors without the traditional credit-debt-to-Ebitda ratio they rely on to conduct their analysis.
“It’s just too difficult to do a ‘real’ analysis on this,” said the second investor.
Exceptionally, the loan was marketed on a loan / value ratio. Uber boasts a net worth of US $ 75 billion, which would provide sufficient coverage for lenders, although this assessment is only implied.
The current assessment follows the purchase of a 17.5% stake in the company in January by a consortium of investors led by Japanese firm Softbank which included a takeover bid for existing shares at a valuation of US $ 48 billion and new shares at a valuation of US $ 68 billion.
Including capital spending and interest expense, the company spent around $ 3 billion in cash last year. The loan will bring balance sheet cash to nearly $ 6 billion.
CLO TRADE
Uber’s debut in the leveraged loan market in 2016 has been criticized by regulators. Morgan Stanley led the $ 1.15 billion TLB with Barclays, Citigroup and Goldman Sachs. The operation is listed at 400bp above the Libor with a floor of 1%.
Regulated banks could not play a direct role in the new deal because Uber is a “criticized name”, and Uber was reluctant to move out of its relationship banking group to an unregulated lead arranger, which led to the unconventional structure. .
Morgan Stanley was the only bank to take an active role in the new deal, but as Uber’s financial advisor rather than conventional arranger. Unlike the 2016 transaction, the bank did not act as an administrative agent.
Macquarie also acts as an intermediary for the CLOs looking to close the deal. As offshore vehicles, CLOs are prohibited from investing directly in US loans, as this would be interpreted as an issue, which could subject them to US corporate tax.
CLOs must wait for a provisioning period – typically around 48 hours – during which the originator closes and funds the loan, before it is transferred to the CLO via an assignment. The process avoids any potential tax liability.
Macquarie, which is unregulated and therefore not subject to the Leverage Lending Guidelines, funds part of the loan that will be allocated to CLO accounts. Cortland Capital Market Services is the administrative agent.
(This version of the story corrects for Morgan Stanley’s role in the 2018 deal)
