Airbnb secures $1bn loan as Covid-19 threatens business

Latest injection follows recent $1bn debt deal

                                

Airbnb has secured a new $1bn (£800m, €920m) loan, which it hopes will help it weather the Covid-19 storm that has ravaged the company.

Major private equity firms are leading the new deal. According to Reuters, Apollo Global Management, Oaktree Capital Management, Sixth Street Partners, Silver Lake and Owl Rock are the most invested parties.

The tourism and hospitality industries have suffered significantly from the novel coronavirus. The widespread lockdowns imposed across much of the world have severely affected Airbnb.

Thus far the business has created a $250m bailout fund for its hosts and abandoned plans for a 2020 IPO.

That Airbnb has actually managed to turn a profit while growing its operation could explain the readiness of investors to help the company. The ongoing crisis has allowed PE firms to obtain favourable terms.

The five-year deal advised on by Morgan Stanley and Goldman Sachs with an interest rate of 750 basis points over the Libor benchmark was reportedly sold at a moderate discount to the loan’s par value, allowing investors to earn a rate of about 12 per cent. Should Airbnb default, these creditors would also be paid first.

Furthermore, in last week’s $1bn debt deal, Sixth Street and Silver Lake secured warrants that can be exercised at an $18bn valuation. This is far below the $25bn internal figure sought by Airbnb last month and the $31bn valuation it achieved in 2017.

Whether these latest injections strengthen or weaken CEO Brian Chesky’s position remains to be seen. Only last week, reports emerged of a growing split in Airbnb’s board and a desire by some to oust the 38-year-old founder.

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