Collaborative consumption business models such as Uber’s are part of the sharing economy, which is driven by a shift from private ownership to shared usage and access. Picture: BLOOMBERG
Collaborative consumption business models such as Uber’s are part of the sharing economy, which is driven by a shift from private ownership to shared usage and access. Picture: BLOOMBERG

New York — Inside New York’s St Regis Hotel on Friday, debt investors will be given what’s becoming a familiar pitch: a high-flying tech company with a charismatic leader but no real cash flow will ask them to lend it money.

This time it’s Uber Technologies, the ride-hailing company that has disrupted the taxi business around the globe.

The company is seeking a $1.25bn loan, according to people familiar with the matter. Its new CEO, Dara Khosrowshahi, is expected to be there among senior management telling investors why this is a good deal.

And given Uber’s cash burn and annual loss, investors will probably be asked to assess the company by other metrics.

One might be its blended valuation of $54bn by a SoftBank Group.-led investor group. That made it the biggest venture-backed technology enterprise without a stock listing.

Management may also tout the $4.5bn of cash the company held on its balance sheet as of December 2017, according to documents seen by Bloomberg.

It would not be the first time investors have bought into deals where the financial benchmarks they normally live by appear beyond elusive.

Take Tesla, whose CEO Elon Musk’s campaign helped the electric-car maker sell $1.8bn of bonds in an oversubscribed deal. Netflix, which like Tesla is also free cash-flow negative, undertook a debt sale in October.

Helping all three is a wide-open credit market where investors are hungry for yield after years of depressed interest rates.

A representative for Uber declined to comment beyond the San Francisco-based company’s earlier confirmation of the loan plan.

Another twist to Uber’s plan is that it’s pitching the debt directly to investors, bypassing the traditional route of using banks to fan the loan out to the lender group.

That is a first in recent loan-market history and a departure from the way borrowers typically work with banks who leverage relationships with institutional investors.

While Uber did not have a bank to lead the syndication of the loan to investors, it did have Morgan Stanley acting as an adviser, said the people, who asked not to be identified because the details are private.

A representative for Morgan Stanley declined to comment on its role.

The New York-based bank led the company’s first foray into the loan capital market for a $1.15bn loan in 2016. In that iteration, the bank syndicated the loan to investors.

What makes Uber atypical for a leveraged loan borrower is its lack of earnings. Of particular importance to leveraged loan investors is a measure of debt relative to earnings used to gauge the riskiness of the loan.

With its fast cash burn, Uber generated negative adjusted pro-forma earnings before interest, tax, depreciation, and amortisation, or ebitda, to the tune of negative $2.2bn last year, according to the documents. That makes calculating a leveraged ratio basically meaningless.

Bloomberg

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