Despite this, Grab's credit profile will continue to be constrained.
The planned initial public offering (IPO) of Grab Holdings, the company behind Southeast Asia's largest ride hailing app of the same name, and the expected US$4.5b cash proceeds it will bring in, will erase its refinancing risk in 2023 and bolster liquidity to support future growth, according to S&P Global Ratings.
“We believe [Grab’s] refinancing risk in 2023 will evaporate with the backdoor-style IPO, through a merger with a special purpose acquisition company (SPAC) on the U.S. NASDAQ market,” the ratings agency said.
Grab’s 2023 maturity wall comprises convertible redeemable preference shares, and the redemption rights of the convertible bond holders will fall away with a public listing as they are converted into equity.
The estimated cash proceeds from the SPAC merger could also provide Grab with additional cash buffers to support its cashburn and future expansion, as well as to lower its existing debt.
The company has heavily relied on funding from investors in the form of convertible securities, having raised nearly US$10b since 2014.
S&P noted that whilst the elimination of refinancing risk in 2023 will benefit Grab’s capital structure over the next several years, its credit profile will continue to be constrained.
“We expect the operations to be loss-making over the next two years, and note the currency mismatch between its US dollar-denominated debt and operating cash flows which are predominantly denominated in Asia-Pacific currencies,” it said.
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