Uber Technologies Inc. is seeking a $1 billion credit line from
banks, people familiar with the matter said, a move that could
signal an eventual initial public offering.
The car-sharing company has recently contacted a number of large
banks asking them how much they would be willing to commit, and at
what terms, to the loan, the people said. About six to seven banks
are expected to be part of the facility, the people said.
Negotiating a credit line is a move that often signals the early
stages of preparation for an IPO as it helps cement relationships
with banks, though the two capital raisings aren't necessarily
linked. An IPO isn't imminent, however, people familiar with the
talks said. One person said a debut wasn't expected until next year
at the earliest.
Uber has already checked off a number of boxes heading to an
initial public offering, including achieving a $41 billion
valuation in a recent fundraising round and a sale of convertible
debt to investors whose value is tied in part to a future offering
price.
Other technology companies to reach similar milestones, Facebook
Inc. and Alibaba Group Holding Ltd., also sought large credit
facilities before their IPOs.
The credit facility, known as a revolver, isn't needed to fund
the company's day-to-day business, people familiar with the deal
said.
Uber has secured more than $5 billion in debt and equity from
investors in the five years since launching. In fact, Uber is in
the process of working on another fundraising that could value the
business at more than $50 billion, The Wall Street Journal has
reported.
Uber may put a large cash sum to work in the near future. The
company has bid to acquire Nokia Corp.'s digital-maps business, the
Journal has reported.
Uber had revenue—after accounting for how much it pays
drivers—last year of roughly $400 million, the Journal
has reported.
The terms of these pre-IPO credit facilities tend to be
favorable to companies, even when companies aren't profitable, such
as with Twitter Inc. when it took out a $1 billion credit facility
in 2013, shortly before its IPO.
For typical, non-IPO companies, turning a profit is often
necessary to get banks to be willing to lend large amounts over
short time frames.
Companies often tap banks that make big credit commitments to
work on their IPO, which is why banks are willing to offer
better-than-standard terms on the loans.
Douglas MacMillan contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com, Telis Demos at
telis.demos@wsj.com and Gillian Tan at gillian.tan@wsj.com
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