(Bloomberg) -- Uber Technologies Inc.’s credit rating isn’t yet investment grade, but the ride-hailing giant is seeking to price its planned $1.2 billion convertible bond issue as though it already is. 

On the back of Uber’s 27% share-price surge since the end of October, and its stronger-than-expected third quarter earnings last week, the company is offering five-year convertible notes at a 0.75% to 1.25% coupon, and at a 27.5% to 32.5% conversion-premium range, Bloomberg News reported. For an issuer with a long-term rating of BB- with a positive outlook from S&P Global Ratings, borrowing on those terms would be significantly cheaper than expected.

The favorable pricing comes as US convertible bond volume, despite returning to near pre-pandemic normality, has disappointed those expecting a renaissance this year.

“New issues have been significantly below expectations in convertibles, both on an absolute as well as relative basis. When that happens, the first mover usually gets attractive pricing,” said Brandon Way, a managing director with Daiwa America Strategic Advisors Corp. “Additionally, this is a name that everyone knows and uses personally, so that adds to demand.”

By contrast, Vishay Intertechnology Inc., a electronic component maker which S&P assigned a BB+ rating, priced a $750 million, seven year issue in September with a coupon of 2.25% and a conversion premium of 20%. Not only is Vishay paying investors more to issue convertible bonds than Uber is set to, the threshold for the conversion to be triggered is relatively lower.

Investment grade companies such as utility owner Southern Co. priced its $1.73 billion, two-year paper in February at 3.875%, and PPL Capital Funding Inc.’s $900 million, five-year note issuance the same month carried a 2.875% coupon.

Uber Seizes Optimism

With a market value of $113 billion, Uber is the largest company to tap the convertible bond market this year. Its latest move takes advantage of the recent decline in interest rates, as the market increasingly believes the Federal Reserve’s rate hike cycle is over. 

It also seizes on a wave of optimism around the company, after it reported its second consecutive profitable quarter earlier this month.

Should the latest issue succeed, the company’s ability to raise additional financing in the current interest rate environment, and to use the proceeds to redeem $1 billion in outstanding 2025 notes that carry a 7.5% coupon, will further improve its credit outlook. 

Although the potential for upgrades to Uber’s ratings are more biased towards 2025 rather than next year, “it appears a matter of when, not if,” Bloomberg Intelligence senior credit analyst Robert Schiffman wrote Monday.

The firm’s liquidity, access to low-cost capital and improving fundamentals to suggest that Uber’s credit ratings could keep climbing over the next 12 to 24 months, he said in August.

Read More: Uber CEO Dara Khosrowshahi Talks Uber’s Earnings, Growth

It’s an opportune time for a healthy-sized issue in the US convertible bonds segment, the only one within equity capital markets that look set to deliver a normal year. This year’s $47.6 billion of volume to date, excluding Uber, is about 1.6 times the amount raised last year, and is edging closer to the average $50 billion annual haul seen before the pandemic. 

An expected wave of investment grade companies switching from high-yield bonds and term loans to convertible bonds has largely failed to materialize. There were only seven priced deals this year that raised over $1 billion, including electric car maker Rivian Automotive Inc.’s issues in March and October that raised a combined $3.23 billion. 

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