Airbnb Raises $2 Billion in Two Deals as the Pandemic Freezes Travel

On 6 April 2020, Airbnb said the private equity firms Silver Lake and Sixth Street Partners would invest $1 billion in the company in a combination of debt and equity securities. On 14 April 2020 it said institutional investors had committed $1 billion to a syndicated term loan.

The two announcements added up to $2 billion of new money, lined up while the coronavirus pandemic had frozen global travel. Airbnb did not publish the price of either deal. News reports resting on unnamed people put the cost at more than 10% interest on the first and a return to lenders of around 12% on the second. Reuters reported that the first came with warrants, which can be exchanged for shares, set at an $18 billion valuation, against the $31 billion it gave for Airbnb's 2017 funding round.

What Airbnb announced

The first statement came on Monday 6 April. Airbnb said the new resources would back its long-term investment in its hosts and its work to serve all of its stakeholders. Brian Chesky, the co-founder and chief executive, said Airbnb saw its future as focused on three core products: its hosts, longer-term stays and Airbnb Experiences. On longer stays he pointed to students who need housing during school and to people on extended work assignments.

For hosts, the investment would include $5 million that Airbnb would put into its Superhost Relief Fund, which was to give grants worth a combined $15 million. The grants were for Superhosts who rent out their own home and needed help paying their rent or mortgage, and for long-tenured Experience hosts who were trying to make ends meet.

The second statement came on Tuesday 14 April. Airbnb said the loan would let it keep investing in the company and in its hosts and guests in more than 220 countries and regions. “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,” Chesky said. He added that the actions of the previous several weeks meant Airbnb would come out of the pandemic stronger, however long it lasted.

What the money reportedly cost

Neither statement gave an interest rate or a valuation, and the second named no lender. The figures in this section come from news reports, most of them citing unnamed people. None is a statement by Airbnb.

On the 6 April deal, CNBC wrote in a report first published that day that the terms were not disclosed. Benzinga wrote on 8 April that the Wall Street Journal had reported the day before that Airbnb was paying 10% interest on the $1 billion, with the Libor benchmark rate on top, and that the two investors were getting warrants that could be converted into shares at an $18 billion valuation. The Next Web, which put the interest at more than 10% the same day, described the Journal's report as citing sources familiar with the matter. Reuters also reported the warrants and the $18 billion figure after the second deal, without naming a source for them. It set that figure against the $26 billion that Airbnb had cited as an internal valuation in early March, and against the $31 billion valuation of its 2017 Series F round. CNBC, citing two sources familiar with the matter, had also reported the fall from $31 billion to $26 billion.

On the 14 April loan, Reuters cited several sources with knowledge of the discussions. They named the private equity firms Silver Lake, Apollo Global Management, Sixth Street Partners, Oaktree Capital Management and Owl Rock as parties to it. They said the loan ran for five years at 750 basis points over the Libor benchmark and was sold a little below its par value, so that investors would earn a rate of around 12%. They described it as first lien debt, which would put those lenders first in line for repayment in a default. Airbnb and all five firms declined to comment.

Bloomberg, citing people with knowledge of the matter, reported that the loan came from a group of more than 20 investors. It named Silver Lake as the largest and listed BlackRock, Eaton Vance, Fidelity Investments and T. Rowe Price Group among the others. It gave the price as 7.5 percentage points over Libor at 97.5 cents on the dollar, tightened from 8 percentage points and 96 cents, and said investor demand exceeded $2.5 billion. It also reported that the new loan was senior to the 6 April borrowing, which it described as second-lien debt and equity securities, and that the new loan included no warrants.

Why Airbnb wanted the cash

Reuters described a home rental business that was suffering as the pandemic froze global travel. CNBC reported that travelers were canceling trips and that Airbnb was dealing with slower bookings. It added that shares in Expedia and Booking Holdings had fallen about 40% and 17% over the month before the first deal.

Airbnb had also made commitments before the deals. TechCrunch reported on 15 April that the company had changed its policy the month before to give guests full refunds on bookings during the coronavirus period, and had later earmarked $250 million to help hosts hit by Covid-19 cancellations. It reported that hosts facing a wave of cancellations and refunds had been angry with Airbnb in the weeks before that report.

The stock market listing was the other open question. Airbnb had said in September 2019 that it planned to list its shares in 2020. Reuters noted that the company had not said publicly whether the turmoil in travel would affect that plan. Bloomberg reported that prospects for an initial public offering in 2020 were dimming, and that the extra funds could help Airbnb weather the crisis without going public.

How the deals were read

One unnamed source presented the first deal as a good one for the company. The source, whom CNBC described as familiar with the matter, said that there was no ratchet and that the terms were not coercive. “It's attractive for Airbnb,” the source said, adding that the funding did not depend on Airbnb's performance or on reaching a target date to go public.

Others read the price as the news. The Next Web called the reported interest “a sign of the travel startup’s desperation amid the coronavirus pandemic”. TechCrunch noted that Airbnb had presented the first deal as strategic, and wrote that the second loan looked more clearly aimed at the immediate damage done by Covid-19. It added that Airbnb's statement did not say when travel would come back.

What it meant for hosts

For a host in April 2020, the deals had three practical consequences.

• The relief money was narrow. The Superhost Relief Fund covered two groups: Superhosts who rent out their own home and needed help with rent or a mortgage, and long-tenured Experience hosts. Hosts hit by cancellations had the $250 million that TechCrunch reported Airbnb had earmarked. No other sum was earmarked for hosts in either statement.
• Longer stays were the stated direction. Chesky named longer-term stays as one of three core products. TechCrunch noted reports that professional landlords in markets such as London were looking to long-term renting for empty vacation rentals. A host with an empty calendar had reason to look at longer stays.
• Nobody gave a date. Airbnb said it would come through the pandemic however long it lasted, and did not say when travel would return. A host budgeting for the months ahead had no forecast from the platform to build on.

Sources

1. Airbnb Newsroom, Silver Lake, Sixth Street Partners Invest $1 Billion in Airbnb (6 April 2020).
2. Airbnb Newsroom, Airbnb Announces $1 Billion Term Loan (14 April 2020).
3. CNBC, Airbnb is raising $1 billion amid fallout from coronanvirus (6 April 2020).
4. Reuters (as published by Gulf News), Airbnb secures new $1 billion loan on top of $1b bond deal (15 April 2020).
5. Bloomberg (as published by The Jakarta Post), Airbnb raises $1 billion in debt from Oaktree, BlackRock (15 April 2020).
6. TechCrunch, Airbnb ups its debt by $1BN amid the coronavirus travel crunch (15 April 2020).
7. The Next Web, Report: Airbnb gouged for over 10% interest on billion-dollar loan (8 April 2020).
8. Benzinga, Airbnb Will Have To Pay Over 10% On $1B Investment From Silver Lake, Sixth Street (8 April 2020).