Facebook Gets $8 Billion From Credit Line, Bridge Loan
Facebook Inc. (FB), the operator of the world’s most popular social-networking website, received an $8 billion package of financing and named 25 new underwriters ahead of its initial public offering.
The loans include a $5 billion five-year revolving line of credit and a $3 billion 364-day bridge loan, the Menlo Park, California-based company said yesterday in a regulatory filing. The new credit facilities were arranged by banks including JPMorgan Chase & Co., Morgan Stanley, Goldman Sachs Group Inc., Bank of America Corp. and Barclays Plc.
Facebook’s new underwriters include Citigroup Global Markets Inc., RBC Capital Markets LLC and Wells Fargo Securities LLC. Smaller banks were added as well, such as M.R. Beal & Co., Muriel Siebert & Co. and William Blair & Co.
Facebook, which said it could use some of the borrowings for general corporate purposes, is bolstering finances in preparation for an IPO that could be the largest Internet offering on record. The company is seeking to raise $5 billion in the share sale, and could be valued at $75 billion to $100 billion, people familiar with the matter have said.
The company, which almost doubled revenue last year to $3.71 billion, also disclosed new information on which regions account for most growth. Europe is its largest market for ad revenue outside the U.S. and Canada. Fourth-quarter ad sales in Europe were $306 million, with $95 million coming from Asia. The U.S. and Canada contributed $462 million in ad revenue.
Members by Region
Europe also is a key market for users. Facebook said it had 229 million active users in Europe last year, 212 million in Asia and 179 million in the U.S. and Canada. The social network has 845 million members worldwide.
The $3 billion bridge loan will be used to fund taxes for employees who exercise their restricted stock units, according to the filing. The $5 billion credit line will be used for working capital and other general corporate purposes, according to the filing.
The expanded credit line will also help Facebook cover the potential legal costs of patent litigation with Yahoo! Inc. (YHOO), a person with knowledge of the situation said last week. Yahoo, based in Sunnyvale California, has asked Facebook to license technologies covered by its intellectual property, and threatened to take legal action if no agreement is reached.
Facebook said in yesterday’s filing that it received a letter from Yahoo on Feb. 27, alleging that a number of its products infringe the claims of 13 patents.
“We are still in the process of investigating the allegation contained in the letter,” Facebook said.
Borrowings under the revolver will pay interest at 1 percentage points more than the London interbank offered rate, according to the filing. Lenders in the deal will be paid a 10 basis point fee on any unused portions.
Facebook’s new five-year credit line will replace an existing $2.5 billion revolver. Debt under the bridge loan will initially pay interest at 1 percent more than Libor, then will increase to 1.25 percentage points after 180 days.
Facebook will pay more to use its credit line than International Business Machines Corp. (IBM), the world’s largest computer-services provider. Armonk, New York-based IBM will pay 0.75 percentage point more than Libor if it borrows from its $10 billion credit line, according to data compiled by Bloomberg. IBM’s borrowing costs under the arrangement will rise if its Aa3 ratings from Moody’s Investors Service and A+ rating from Standard & Poor’s are cut.
To contact the editor responsible for this story: Faris Khan at firstname.lastname@example.org
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.