Airbnb Raises $1 Billion in Debt

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 [e-mail]

(END) Dow Jones Newswires

June 16, 2016 13:35 ET (17:35 GMT)

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