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Uber Looks to Raise $1.5 Billion from Debt Investors



Uber CEO Dara Khosrowshahi

It seems that Uber isn’t content with making colossal losses. They’re looking to get further indebted as well to the tune of $1.5 billion. In what may be the company’s first foray into the junk bond market, Uber now seeks to raise their next astronomical sum of cash in high-yield bonds.

Teaming up with Morgan Stanley, Uber is working on a private placement that could yield between 7.5-8% on $500 million in 5-year notes and a further $1 billion in 8-year notes.

Uber Is in Good Company

Uber isn’t the only unicorn posting losses left and right with WeWork tripling its losses in 2017. It’s also not the first to get into high-yield bonds. The office-space provider entered into a $702 million deal earlier this year, as did Tesla with $1.8 billion in 2017. Even the ride-hailing company itself has already raised billions from creditors.

In fact, this new transaction comes just a few months after Uber sold $1.5 billion in leveraged loans that were marketed directly to investors. And Uber’s first leveraged loan deal took place in 2016 for the same amount.

Fundraising Like It’s Going Out of Style

The upstart startup has been raising funds like it’s going out of style, including from private equity investors. That includes some $9 billion from a consortium led by Japan’s SoftBank. Toyota also invested half a million dollars in Uber as part of a collaboration effort to look into autonomous vehicles. We all know how well that’s gone so far.

But it seems that Uber’s appetite for stockpiling funds can’t be satiated and their return to the debt market looks to be opportunistic. Under normal circumstances, high-yield investors will try to gauge a company’s health based on cash flow and earnings compared to its debt burden, all of which are disastrous metrics for Uber.

However, most investors recognize that these analyses aren’t appropriate for loss-making companies like Uber and that they may need to carry out their own research on how the company will be able to repay their debt.

Since Uber appears to have a cash burn problem, it doesn’t seem like there will be much interest from investors in getting saddled with Uber’s bad debt. Although, a few ears will be listening since the interest rate on the bonds is so high.

Uber IPO Ahead

While Uber has its sights set on going public, its IPO isn’t targeted until next year. In the meantime, that’s a lot of time left to blow through extra cash. Uber seeks a further $1.5 billion to ramp up its business efforts to compete in new businesses such as bike and scooter sharing and food delivery.

Uber CEO Dara Khosrowshahi believes that it will still be some time before the company becomes profitable. They need to invest in further avenues of growth first.

“We suffer from having too much opportunity as a company,” he reportedly said. Sounds like a nice problem to have.

Featured Image from Uber, Uber CEO Dara Khosrowshahi 

Christina is a B2B writer, MBA, fintech and crypto reporter with a fascination for technology and a passion for starting interesting conversations. When not at her computer you can find her surfing a wave or sipping on wine. Sometimes, at the same time.

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Billion Dollar Companies

Procter & Gamble Surpasses Expected Revenue Thanks to Beauty Products




Procter & Gamble (P&G) stocks have surged by 5% since Friday morning, as reported by CNBC. P&G announced that its beauty products are responsible for driving sales and helping the company in surpassing the expected revenue in the fiscal fourth quarter of 2018.

Wall Street was expecting earnings per share (EPS) to be $1.09 and revenue to be $16.46 billion. However, P&G’s report shows an increase in both these numbers–$1.12 for the former and $16.69 for the latter.

Compared with beauty products, P&G’s fabric and home-care brands sales jumped by 2%, while grooming, health care, baby, feminine, and family care dropped by 1%, 3%, and 3% respectively.

In this year, P&G’s shares slumped by 11%; the company now has a market cap of $202 billion.

Even though P&G faces competition from other rising startups, the company is positive that the current boom in revenue will “hold up.”

On October 16, Nasdaq published a post anticipating the results from the fiscal fourth quarter. The report stated that net sales would rise by 4% due to P&G’s beauty, fabric, and healthcare products. They predicted that Q4’s sales would come from baby, feminine and family care products. However, these categories are the ones that dropped the most in the latest quarter.

P&G Has Some Fierce Competition

P&G’s biggest competitor in the grooming industry is the Dollar Shave Club, which was acquired by Unilever in 2016. In an interview with Cincinnati Business CourierJon Moeller, the chief financial officer of P&G, said that grooming and baby products were:

“the two sales growth challenges.”

He added that the company was developing and funding ideas to support Gillette. Moeller also said that the stakes were higher since competitors are now expanding their products into Europe.

An online subscription program called Gillette on Demand was also launched by the company. It offers three different packages compared to the two packages offered by the Dollar Shave Club.

Gillette has been around since the 1980s but Dollar Shave Club has managed to attract more attention due to advanced marketing tactics. Currently, P&G expects its organic sales to fall between 2% to 3%, EPS between 6% to 8% and all-in-sales growth by approximately 3% in fiscal 2018.

Meanwhile, David Taylor, P&G’s CEO, recently launched 2019’s CEO Challenge where students solve various business problems. The finals will take place in May 2019 in Dubai.

Last year’s challenge was won by a group of industrial engineering students from Saudi Arabia. These students were also offered jobs in the company. This year, the real-world business problems students will solve are based on its grooming brand Gillette.

Featured image from Shutterstock.

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