US: Just one week after raising $1 billion in funding from the likes of Silver Lake and Sixth Street Partners, Airbnb has secured a further $1 billion loan in senior debt, reportedly through the same private equity firms, as well as Apollo Global Management, Oaktree Capital Management and Owl Rock.
The emergency finance injection, coming in the form of a syndicated term loan lasting for five years according to Reuters, would have to be paid back as a priority over unsecured junior debt if Airbnb were to go out of business. Amid the lockdown caused by the Covid-19 pandemic, the global travel and vacation rental industries continue to be hit hard as mobility restrictions are issued and bans on short-term rentals are implemented in certain states, regions and cities around the world.
Though the rumoured investors have declined to comment, The Financial Times has reported that the loan will carry an interest rate of 7.5 percentage points above the risk-free rate and will take priority to be repaid over the debt that was raised a week ago. It added that the company had attracted around $2.5 billion of interest from investors for the offering.
Last week’s raise in debt and equity securities was seen by some as a bailout to weather the coronavirus storm, having made provisions to cut costs of up to $800 million a year with a freeze on marketing expenditure and new hirings. However, Airbnb is doing its best to project a more encouraging image, saying that last week’s funding would be diverted towards its host community, enabling the company to be in the “strongest possible position as travel rebounds from the Covid-19 pandemic”.
In a statement issued on Tuesday evening, Airbnb CEO and co-founder, Brian Chesky, said: “I deeply appreciate the confidence and trust that so many have shown in our company even as every sector in travel is going through the storm of the pandemic. We know travel will return and rather than merely hunkering down, the support we have received will allow Airbnb to continue moving forward as we invest in our community.
“All of the actions we have taken over the last several weeks assure that Airbnb will emerge from the storm of the pandemic even stronger, regardless of how long the storm lasts,” he added.
The firm faced a major backlash from hosts and guests in March over its perceived abruptness in cancelling bookings, before it performed a U-turn over its extenuating cancellation booking policy to allow guests to be fully refunded for bookings made during the coronavirus outbreak period. Shortly afterwards, it set up a $250 million relief fund for hosts who had had their income streams wiped out by Covid-19 cancellations.
Last week, the situation was compounded by news that the UK would be banning all private room bookings for the foreseeable future following reports of hosts advertising “lockdown retreats” for families in rural locations across the country.
As well as that, Airbnb granted investors equity warrants that valued the company internally at $18 billion, a sharp drop from the initial $31 billion valuation that it achieved in its previous major funding round in 2017.
It serves as further evidence that Airbnb will be required to delay its scheduled public float, having planned to be trading publicly at some point in 2020. The launch process was set to begin in spring this year, before the full impact of the coronavirus was starting to set in.