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Capital Markets

Direct lending: Uber takes short cut to loan investors

Ride hailing app raises over $1bln directly; banks may test regulation with lower-rated credits.

Uber-London-R-780



When ride-hailing app Uber decided that it wanted to raise $1.25 billion in early March, it thought it would take a different route. The firm last tapped the market in mid 2016 with a loan arranged by Morgan Stanley and Barclays. It raised $1.15 billion – slightly less than anticipated – at 400 basis points over Libor from the two banks plus Citi and Goldman Sachs.

This time Uber took things into its own hands. Retaining just Morgan Stanley and only as an adviser, the firm raised seven-year new money directly from the market using its own capital markets team. And it only paid slightly more for it: 425bp to 450bp over Libor. This is despite the fact that an Uber self-driving car hit and killed a pedestrian in Arizona during the syndication process. 

The absence of the US banks from this deal is not hard to fathom (non-US regulated Macquarie is acting as CLO intermediary). Uber reported a negative ebitda of $2 billion for 2017 – lending $1 billion to it was never going to sit happily with the lending guidelines for leveraged finance to which the banks have been subject since 2013. 




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