Uber Closing $2 Billion Credit Line to Enter IPO

By | June 20, 2015

Uber Technologies is closing a $2 billion credit line, said those familiar with the matter, in a deal that emphasizes Wall Street’s eagerness for the company’s prospects.


San-Francisco based ride-sharing company Uber was on a look out for $1 billion credit facility from six to seven banks last month as reported by The Wall Street Journal. The banks were quite interested be to part  and some were even ready to invest more than asked amounts. Beating the competition, the five-year old facility Revolver is being priced half a percentage point lower than an already competitive rate discussed at the beginning.

The arrangement of the deal is led by Morgan Stanley. Other banks that are part of it are Bank of America, Barclays, Citigroup, Deutsche Bank, Goldman Sachs Group, HSBC Holdings, JPMorgan Chase and SunTrust Banks.

It is often said that for a company that is planning for an initial public offering would take the first step by raising a credit line from Wall Street, as it would help the company build a rapport and relationship with the banks. But people familiar with the matter say that a UBER IPO is not about to happen. It is a general practice of the companies to reward banks that make big credit commitments with highly regarded roles on their IPO, which becomes the reason why many banks come forward to provide loans at the interest rate lesser than the standard rates.

Uber already seems to be on the way to the IPO which includes achieving $41 billion valuation in a recent fund-raising round and selling of the convertible debt to investors whose value is fixed in part to a future offering price. Sources suggest that Uber is in discussions to raise more funds soon that would increase the value of the company to $50 billion or even more.

Facebook, Twitter and Alibaba Group Holding are other technology companies that entered into IPO by arranging for credit through banks. People familiar with the matter say that the credit amount is not actually needed by the company to fund Uber’s day-to-day business.