Airbnb has announced a $1bn syndicated term loan from institutional investors, adding to the $1bn it raised last week from Silver Lake and Sixth Street Partners.
Airbnb co-founder Brian Chesky said that the money meant rather than, rather that “merely hunkering down”, the company would “continue moving forward”.
It was thought that private equity firms Silver Lake, Apollo Global Management, Sixth Street Partners, Oaktree Capital Management and Owl Rock participated, with the loan priced at an interest rate of 750 basis points over the Libor benchmark.
Chesky said: “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.”
Airbnb had planned to IPO this year, with a direct listing mooted, which would have allowed its investors to exit, but without raising additional cash. Chesky commented before the current outbreak that the company did not need to raise money.
Chesky announced that the company would be shifting its business model to long-term stays. He said: “From students needing housing during school, to people on extended work assignments, Airbnb is a place where many have found longer-term housing. In the future, dreams of living in another community will become a growing reality - in homes that come with the benefits of Airbnb.”
Research released last month by Airdna and RightMove found that landlords were moving back into the traditional rental market as the short-term market stalled, putting Airbnb’s portfolio at risk. Airdna said: “Let’s not avoid the elephant in the room: anecdotal evidence from many vacation rental owners is bleak. Bookings are down, cancellations are up, and the outlook for 2020 looks to be far less promising than initial projections.”
Silver Lake and Sixth Street Partners funds’ investment will include $5m which Airbnb will contribute to its Superhost Relief Fund, which will provide grants worth a combined total of $15m to Superhosts who rent out their own home and need help paying their rent or mortgage, as well as long-tenured Experience hosts trying to make ends meet.
Airbnb flipped on its refund policy in recent weeks, initially offering full refunds on bookings, before amending it, allocating $250m to pay hosts 25% of their cancellation fees in the case of some bookings.
Insight: Once you’re in for $1bn with your private equity overlords, you might as well be in for $2bn. What’s the phrase I’m rummaging around for? Double or quits? The platform is, one assumes, not eager to get into the quit part and, we think we can safely surmise, not going to proceed with an IPO this year either.
So what is it up to? As one observer noted to us, if you’re going to load up on debt, now’s the time, what with interest rates being pretty tasty. Although paying around 9% isn’t the kind of loan which would have me ribald and rollicking.
So why take it on? Last week we learned that the group was focusing on the long-term market, moving away from short term and the purview of hotels. One would hope that $1bn could shield it from the impact of the outbreak - or the market is in worse shape than we thought - so we can only imagine that M&A is on its mind. A number of extended stay brands held their hands up to thank Airbnb for bringing customers their way. Maybe the platform will now be offering their investors an exit.