The Covid-19 pandemic has put a strain on ridesharing businesses thanks to social distancing measures, but companies like Uber are turning to bonds in order to carry them through the rest of 2020. The ridesharing company is set to issue $500 million in 8-year bonds.
Per a Bloomberg report, the company is following a trend and joins “a barrage of high-yield companies that are capitalizing on cheap rates to lower their interest expense. The ride-sharing service sold bonds due in 2028 at an interest rate of 6.25%, its lowest ever, according to data compiled by Bloomberg. The proceeds, along with cash on hand, will be used to redeem an equal amount of 7.5% notes due in 2023, according to a statement Monday.”
“Uber is taking advantage of some of the lowest-ever yields to refinance outstanding obligations,” the report added. “That’s made up the bulk of this year’s borrowing activity, as junk-bond issuance has vaulted over $300 billion for the first time since 2013 and the market is within striking distance of a new annual record.”
Here are a few funds exchange-traded fund (ETF) investors may want to consider for exposure to similar high yield debt:
- Xtrackers Bloomberg Barclays US Investment Grade Corporate ESG ETF (ESCR): seeks investment results that correspond generally to the performance, before fees and expenses, of the Bloomberg Barclays MSCI US Corporate Sustainability SRI Sector/Credit/Maturity Neutral Index. The index generally aims to keep the broad characteristics of its parent index, the Bloomberg Barclays US Corporate Index (an investment grade corporate bond universe), resulting in a broad investment grade fixed income market exposure with ESG aspects.
- Xtrackers USD High Yield Corporate Bond ETF (HYLB): seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive USD High Yield Corporates Total Market Index. The index comprised of U.S. dollar-denominated high yield corporate bonds will concentrate its investments in a particular industry or group of industries to the extent that its underlying index is concentrated.
- Xtrackers Short Duration High Yield Bond ETF (SHYL): seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive USD High Yield Corporates Total Market 0-5 Year Index. The fund will invest at least 80% of its total assets (but typically far more) in component securities of the underlying index. The underlying index is designed to track the performance of short-term publicly issued U.S. dollar-denominated below investment grade corporate debt.