Ride-hailing giant Uber Technologies Inc. has increased its planned convertible bond issue to $1.5 billion, highlighting robust demand among investors.
The move comes as Uber prices the issue with a 0.875% coupon, nearing the lower end of the marketed range. The conversion premium is set at 32.5%, positioned at the top of the range.
Uber’s initial plan was to raise $1.2 billion with a coupon range of 0.75% to 1.25% and a conversion premium of 27.5% to 32.5%.
The decision to upsize the offering indicates strong investor interest. The company’s representative has not yet responded to requests for comments.
This successful share sale follows Uber’s notable 27% share-price surge since the end of October and its better-than-expected third-quarter earnings.
The move to tap into the convertible bond market is opportune for Uber, with a market value of $113 billion, making it the largest company to enter the convertible bond market this year.
The favorable pricing is attributed to Uber’s impressive performance, with two consecutive profitable quarters reported.
This move capitalizes on the positive market sentiment and a decline in interest rates, reflecting the belief that the Federal Reserve’s rate hike cycle has concluded.
Upon the deal’s closure, Uber’s improved credit outlook will enhance its ability to raise additional financing in the current interest rate environment.
The proceeds will be used to redeem $1 billion in outstanding 2025 notes carrying a 7.5% coupon, further strengthening the company’s financial position.
Bloomberg Intelligence senior credit analyst Robert Schiffman noted that while potential upgrades to Uber’s ratings may be more biased towards 2025, positive developments seem inevitable.
Uber’s liquidity, access to low-cost capital, and improving fundamentals position the company for credit rating upgrades over the next 12 to 24 months.
