Uber may be turning to the leveraged-loan market for the first time to fuel global expansion. Uber has hired Morgan Stanley, Barclays, PLC, Citigroup, and Goldman Sachs to issue $1B to $2B of debt. The financing follows Uber's $3.5B equity raise from the investment arm of Saudi Arabia earlier this month. The acceleration of Uber's capital raising underscores the cost of its efforts to expand global market share.
By placing debt rather than equity, Uber also can avoid diluting its existing shareholders. Uber Chief Executive Travis Kalanick has indicated the company is unlikely to go public for at least another year, which could help explain why it is seeking more unorthodox sources of funds. Startup technology companies rarely tap the leveraged-loan market because institutional investors usually reject borrowing requests from companies like Uber that lose money. Unlike stock pickers, who often buy on expectations of future growth, debt investors focus on a company’s ability to generate the cash it needs to repay obligations.