Delivery Hero Launches €1.4 Billion Debt Financing Syndication

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Delivery Hero has launched a €1.4 billion (~$1.55 billion) debt financing syndication, the German takeaway company announced on Monday. The proceeds of this syndicated financing will be used by the company to strengthen its long-term liquidity position.

In announcing this debt financing syndication, Delivery Hero also offered advice for the 2023 financial year and expects to achieve positive adjusted EBITDA for the entire group, including Glovo. “We are delighted to be able to launch this financing transaction today, as it demonstrates our ability to access diverse sources of funding through the fundamental strength of our business,” said Niklas Östberg, CEO and Co-Founder of Delivery Hero.

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Syndicated financing to strengthen liquidity

Delivery Hero has disclosed that its term loan financing syndication includes an $825m term facility and a €300m term facility. These term facilities offered to the company by a syndicate (or group of lenders) have a maturity of 5.25 years. Proceeds will also be used by Delivery Hero for potential refinancing of convertible debt at maturity, working capital and collateral.

The company also announced its intention to enter into a revolving credit facility (RCF) in the amount of €375 million with a consortium of banks. The RCF signed by Delivery Hero will have an initial maturity of 3 years, with options for two 1-year extensions. The RCF will however remain undrawn at the close of this operation.

Delivery Hero has reorganized its financing structure with an emphasis on diversifying its sources of financing and improving its liquidity position. As part of this effort, Delivery Hero placed two tranches of unsecured convertible bonds with principal amounts of €750 million and €500 million, maturing in April 2026 and March 2029, respectively.

At the time of the issuance of these convertible bonds in September last year, the company stated that the bonds would initially be convertible into approximately 6,826,125 new or existing nominal shares of Delivery Hero common stock.

“We have put in place a strong and diversified capital structure that provides us with financial flexibility and ample liquidity reserves to achieve our strategic priorities. This financing transaction marks another important milestone for Delivery Hero as we move towards our goal of delivering superior growth while approaching profitability at the group level,” adds Östberg.

Target: Positive Adjusted EBITDA in 2023

By diversifying its funding sources, delivery hero also provides an update on its financial performance. On a pro forma basis, the company delivered GMV and total segment revenue growth of 30% and 55% year-on-year, respectively, in the first two months of 2022.

The company expects to achieve an adjusted EBITDA/GMW margin of approximately -1% to -1.2% for fiscal 2022. It expects the integrated verticals segment to contribute negative adjusted EBITDA of up to -525 million euros, while the platform business is expected to generate positive adjusted EBITDA in 2022.

However, Delivery Hero expects to generate positive adjusted EBITDA for the entire group, including Glovo, in fiscal 2023. This should mark a major turnaround for the food delivery network, which aims to become operationally profitable in fiscal year 2023.

Delivery Hero: what you need to know

Delivery Hero was founded in 2011 as a network of online food ordering sites. It operates in 40 countries in Asia, Europe, Latin America, the Middle East and North Africa. With a market capitalization of 11.63 billion euros, Delivery Hero has seen its valuation increase since its first listing on the Frankfurt Stock Exchange with a market capitalization of approximately 4.5 billion euros. It became part of the main DAX index in 2020.

The thorn in Delivery Hero’s success has been its inability to turn a profit. Although it recorded growth in total revenue, its acquisitions were not always successful. The company acquired Rocket Internet’s FoodPanda business to gain a foothold in 20 new countries in Eastern Europe, the Middle East and Asia.

In January, Delivery Hero signed an agreement to acquire a majority stake in Glovo, a Barcelona-based on-demand delivery startup. A few days later, the company sold its stake in Latin American delivery company Rappi for $150 million. While it continues to hold a c.79% stake in Rappi on a diluted basis and has grown to offer logistics as a service, the objective of achieving positive adjusted EBITDA is now the priority of his management.

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