Delivery Hero launches €1.4B debt financing syndication; targets adjusted positive EBITDA in FY 2023

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

While announcing this debt financing syndication, Delivery Hero also offered guidance for FY 2023 and expects to reach positive adjusted EBITDA for the entire group, including Glovo. “We’re excited to be able to launch this financing transaction today, as it proves our ability to access various funding sources thanks to the fundamental strength of our business,” says Niklas Östberg, CEO and Co-Founder of Delivery Hero.

Syndicated financing to bolster liquidity

Delivery Hero has revealed that the syndication of its term loan financing comprises a $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. The proceeds will also be used by Delivery Hero for potential refinancing of convertible debt at maturity, working capital and guarantees.

The company also announced plans to enter into a revolving credit facility (RCF) in the amount of €375M 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 closing of this transaction.

Delivery Hero has been revamping its financing structure with focus on diversifying its funding sources and improving its liquidity position. As part of this effort, Delivery Hero placed two tranches of unsecured convertible bonds with a principal amount of €750M and €500M, maturing in April, 2026, and March, 2029, respectively.

At the time of issue of these convertible bonds in September last year, the company had said that the bonds will be initially convertible into approximately 6,826,125 new or existing ordinary no-par value registered shares of Delivery Hero.

“We have established a strong and diversified capital structure that provides us with financial flexibility and ample liquidity buffers to deliver on our strategic priorities. This financing transaction marks another important milestone for Delivery Hero as we are progressing on our objective of delivering superior growth while approaching group level profitability,” adds Östberg.

Target: Positive adjusted EBITDA in 2023

As it diversifies its funding sources, Delivery Hero is also providing an update on its financial performance. On a pro forma basis, the company generated GMV and total segment revenue growth of 30 per cent and 55 per cent YoY, respectively, during the first two months of 2022.

The company expects to achieve an adjusted EBITDA/GMW margin of around -1 per cent to -1.2 per cent for FY 2022. It expects the integrated verticals segment to contribute a negative adjusted EBITDA of up to -€525M while the platform business is expected to deliver a positive adjusted EBITDA in FY 2022.

However, Delivery Hero expects to generate a positive adjusted EBITDA for the entire group, including Glovo, in FY 2023. This should mark a major turnaround for the food delivery network, which aims to become profitable at an operating level in FY 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 across Asia, Europe, Latin America, the Middle East, and North Africa. With a market cap of €11.63B, Delivery Hero has grown in valuation since it was first listed on the Frankfurt stock exchange with a market cap of around €4.5B. It became part of the leading index DAX in 2020.

The thorn in Delivery Hero’s success has been its inability to turn a profit. While it has reported growth in total revenue, its acquisitions have not always turned out to be successful. The company acquired Rocket Internet’s FoodPanda business to gain a foothold in 20 new countries across 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. Few days later, the company sold $150M worth of its stake in Latin-American delivery company Rappi. While it continues to hold an approximate 79 per cent stake in Rappi on a diluted basis and has expanded to offer logistics-as-a-service, the goal to reach adjusted positive EBITDA has now reached top of its leadership’s priority.