Uber Technologies (NYSE:UBER) announced, on Monday, an upsized offering of Convertible Senior Notes, now totaling $1.5 billion with a 0.875% interest rate and a maturity date set for December 1, 2028. The company initially planned to issue $1.2 billion in notes but increased the offering based on investor demand.
The closing of the offering is expected by Friday, with the proceeds earmarked for several strategic financial moves. Uber intends to use the funds to manage outstanding debt, specifically targeting the potential retirement of $1 billion in senior notes due in 2025. Additionally, the company plans to engage in capped call transactions designed to reduce earnings dilution for shareholders during conversions of the notes.
These capped calls will come with anti-dilution adjustments and an initial cap price that represents a significant premium, providing a buffer against potential dilution from the conversion of the new notes into stock. This financial instrument allows Uber to receive cash payments beyond principal amounts, which may influence its stock price due to secondary market activities by option counterparties.
Investors holding these Convertible Senior Notes will have the option to demand repurchase under certain conditions, such as specific corporate events that affect conversion rates or if a fundamental change occurs within the company.
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