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Uber Technologies, though not yet rated as investment grade, plans to issue $1.2 billion in convertible bonds, capitalizing on its recent 27% share-price surge and robust Q3 earnings. The offering includes five-year convertible notes with a 0.75% to 1.25% coupon and a 27.5% to 32.5% conversion-premium range. Despite Uber's BB- rating, these terms would be more favorable than expected.
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Uber's move, leveraging its $113 billion market value, seizes on low interest rates and positive market sentiment after two consecutive profitable quarters. The offering aligns with Uber's strategy to redeem $1 billion in outstanding 2025 notes with a 7.5% coupon, enhancing its credit outlook. While Uber's potential rating upgrades may lean towards 2025, the company's liquidity, access to low-cost capital, and improving fundamentals suggest ongoing credit rating improvement over the next 12 to 24 months.
Why it matters
In the convertible bonds market, Uber's issuance stands out as one of the largest this year, with the sector witnessing increased activity. The move reflects a healthy market segment amidst broader equity capital markets. Despite a general anticipation for investment-grade companies to transition to convertible bonds, the wave has been subdued, with only seven deals raising over $1 billion this year.
