Airbnb in talks to increase debt amid global crisis

(Bloomberg) – Airbnb Inc. is in talks with investors to take on up to $ 1 billion in additional debt after it announced a $ 1 billion debt and equity deal on Monday, according to people familiar with the matter.

The travel platform company said Monday it is raising $ 1 billion in debt and equity from Silver Lake and Sixth Street Partners. The company has had discussions about raising an additional $ 500 billion to $ 1 billion by issuing either senior debt, which would prioritize its holders in the event of default, or a convertible note or the sale of a stake, said the people, who requested not to be identified because the information was not public.

The additional funds would give Airbnb an additional financial cushion as the outlook for an initial public offering darkens this year. The money could help Airbnb weather the economic crisis caused by the coronavirus pandemic without being made public, and could also allow the company to make acquisitions, a strategy it has evaluated, people with knowledge of the subject last month.

Airbnb has not disclosed the terms of its agreement with Silver Lake and Sixth Street Partners. People familiar with the matter said the transaction consisted of senior debt, as well as warrants for around 1% of the company’s equity. The mandates give Airbnb a valuation of $ 18 billion, one of the people said. This compares to an earlier value of $ 31 billion.

In March, the world’s largest colocation company reported a fourth-quarter loss of $ 276.4 million excluding interest, taxes, depreciation and amortization, down from a loss of $ 143.7 million a year earlier, according to someone familiar with the company’s accounts.

Monday’s deal raised an interest rate from 11% to 12%, the people said. The investment does not entitle investors to a seat on Airbnb’s board of directors, one of the people said.

Raising second-tier debt means Airbnb has the option of taking on more senior debt, which it is considering. The company could also raise a convertible note or shares instead, the people said.

As the house-sharing company goes into debt, it cancels a billion-dollar credit facility with multiple banks administered by Bank of America Corp. Those banks include Morgan Stanley and Goldman Sachs Group Inc., both of which have advised on the Silver Lake- Sixth Street Transaction, one of the people said. A Bank of America representative declined to comment.

The deal announced on Monday was intended to help the home-sharing company weather the pandemic devastating the global travel industry, Airbnb said in a statement.

“The new resources will support Airbnb’s ongoing work to invest for the long term in its community of hosts who share their homes and experiences, as well as work to serve all stakeholders in the Airbnb community,” said the company.

(Updates with details of the fundraising talks from the fifth paragraph.)

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