(Bloomberg) -- Fitch Ratings assigned Uber Technologies Inc. an investment-grade credit rating on Tuesday, citing its resilience in the ride-share and food delivery markets, as well as its expansion into newer offerings and conservative financial policy.
Uber’s main bonds were rated BBB, two steps above speculative grade, Fitch said in a statement on Tuesday. The rating qualifies the company’s debt to move to investment-grade, coming shortly after S&P Global Ratings upgraded the firm’s main bonds to BBB-, the lowest investment-grade level, from BB+, the highest junk grade, on Aug. 16.
Uber has publicly stated its goal of achieving an investment-grade credit profile. Investment-grade credit ratings can translate to lower borrowing costs for a company, because a wider array of investors are eligible to buy high-grade securities.
Uber’s latest ratings are supported by its strong position in the ride-share market and growth of its food delivery business, according to Fitch, as well as its push into newer offerings like grocery delivery, which could cement it as the “provider of choice” for mobility services and help differentiate it from rivals.
“While still unproven, new platform services represent incremental growth potential for the company beyond ride share and food delivery, and could lead to greater consumer engagement,” reads the Fitch note.
The company’s free cash flow generation also gives it enough flexibility to stay within its Ebitda leverage target of 2x, according to Fitch. The ratings company anticipates Ebitda leverage reaching about 1.5x in 2024.
Moody’s Ratings upgraded Uber’s main bond rating to Ba1, the highest junk level, from B1 — a three-notch upgrade — in February, making it the only one of the “big three” credit graders to remain below investment-grade.
Uber has come a long way from a startup with $30 billion in accumulated deficits over years of freewheeling spending as it sought to gain market share and push into new markets. Last year, after more than a decade in business, it posted its first full year of operating profit as a public company, helping it gain access into the benchmark S&P 500 Index at year-end. In another sign of healthy cash levels, in February its board also authorized a plan to return as much as $7 billion in capital to shareholders.
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