Airbnb Raises $1 Billion in Debt
June 16 2016 - 1:50PM
Dow Jones News
Airbnb Inc. closed $1 billion in debt from large banks to fuel
the expansion of its home-sharing site, a person familiar with the
matter said.
J.P. Morgan Chase & Co., Citigroup Inc., Bank of America
Corp. and Morgan Stanley all participated in the credit facility,
the person said. Bloomberg earlier reported on the deal.
Airbnb is raising new funds as it continues a breakneck global
expansion and takes steps toward an initial public offering. The
eight-year-old company, last valued by investors at $25.5 billion,
has amassed more than 2 million listings of accommodations in 191
counties.
More startups are turning to debt to raise large amounts of cash
without having to dilute their existing shareholders or set a new
valuation. Uber Technologies Inc. is currently in talks to raise $1
billion to $2 billion in the leveraged loan market, people familiar
with the matter said this week.
Unlike stock pickers, who often buy on expectations of growth,
debt investors focus on a company's ability to generate the cash it
needs to repay obligations.
Airbnb expects to make $3 billion of earnings before interest,
taxes, depreciation and amortization by the year 2020, the
company's representatives told prospective investors last year. At
the time, the company projected an operating loss of about $150
million for 2015.
Debt instruments are a common way for large banks to generate
goodwill with hot startups on the verge of an IPO. Companies often
tap banks that make big credit commitments to work on their IPO,
which is why banks are willing to offer better-than-standard terms
on the loans.
The terms of these pre-IPO credit facilities tend to be
favorable to companies, even when companies aren't profitable, such
as with Twitter Inc. when it took out a $1 billion credit facility
in 2013, shortly before its IPO.
Airbnb has raised $2.3 billion in equity funding from a range of
investors, including Sequoia Capital, Andreessen Horowitz, Tiger
Global Management and TPG Growth. At least four mutual-fund
companies are also investors, and they all value Airbnb's stock
differently, ranging from $73.41 to $120.68 a share, according to
The Wall Street Journal's Startup Stock Tracker.
The company last year hired Blackstone Group LP's former chief
financial officer, Laurence Tosi, as its new CFO, a step seen as a
step toward a potential IPO. The company hasn't discussed any plans
for a public offering.
Write to Douglas MacMillan at douglas.macmillan@wsj.com
(END) Dow Jones Newswires
June 16, 2016 13:35 ET (17:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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