Airbnb’s new $1 billion investment comes at lower valuation

Airbnb Inc’s new $1 billion investment from private equity firms Silver Lake and Sixth Street Partners has terms that imply a reduced valuation of the home rental company.

Silver Lake and Sixth Street received warrants that can be exercised at an $18 billion valuation, below the $26 billion Airbnb was valued in early March in its internal valuation, one source said.

The deal was seen as a sign of investor support as the coronavirus grinds global travel to a near-standstill, and the sources said Airbnb will terminate a $1 billion credit facility following the investment, the sources said.

The deal is comprised of $1 billion in five-year debt yielding 11% to 12% and warrants that can convert into stock equating to a little over 1% of Airbnb’s total equity, the sources said. They requested anonymity as the terms are confidential.

The deal raised Airbnb’s cash reserves to around $4 billion. [nL4N2BU3PH]

The U.S. short-term home rental platform held a phone meeting with lenders to discuss extending an existing $1 billion debt facility, which was led by Bank of America (BAC.N), amid a slowdown in demand due to the coronavirus pandemic.

Airbnb is now also in talks with banks about a new line of credit that could be worth as much as $750 million or $1 billion, one source said.

Airbnb was valued at $31 billion in its most recent private fund-raising round.

Silver Lake is targeting a valuation for Airbnb of $40 billion to $50 billion to hit its return target, one of the sources said, declining to provide more details.

Airbnb, Silver Lake, Sixth Street and Bank of America declined to comment.