Airbnb Lenders Reap $1 Billion Windfall on Pandemic Lifeline

(Bloomberg) -- Two firms that provided a $1 billion lifeline to Airbnb Inc. at the onset of the pandemic have roughly doubled their money on the investment following the home-sharing company’s blowout initial public offering.

Silver Lake and Sixth Street Partners were sitting on paper gains of about $460 million each as of Thursday via warrants that were attached to a second-lien loan they extended to the company in April, on top of the double-digit interest they’ve earned on the debt, according to people with knowledge of the matter.

Those gains could extend as Airbnb’s share price climbs and should it opt to retire the expensive loan before it has the right to repay it next year, which would require the company to compensate investors for missed future interest payments, one of the people said.

Such dramatic returns in such a short period of time are rarely seen in the loan market, and reflect how quickly sentiment has recovered since the depths of the selloff eight months ago, especially for companies that have thrived in spite of the pandemic. The loan was part of $2 billion of debt Airbnb raised to build a financial cushion as the coronavirus outbreak upended the global travel industry.

Much of the paper profits stem from the meteoric rise in Airbnb’s stock price on its first day of trading Thursday. Through the warrants, the two firms have the right to buy shares at a little over $28. On Thursday, the stock closed at almost $145. It fell to $139.80 as of 3:42 p.m. in New York. The loan itself pays interest of at least 11%, according to the company’s stock offering documents.

Representatives for Silver Lake, Sixth Street and Airbnb declined to comment.

Silver Lake and Sixth Street were also among a group of over 20 investors that extended a second $1 billion loan to Airbnb in April as well. The debt, which ranked more senior to the earlier transaction and didn’t include warrants, has already returned over 16%, according to people familiar with the loan’s trading who asked not to be identified because they’re not authorized to speak publicly.

That loan, which pays annual interest of at least 8.5% and was issued at 97.5 cents on the dollar, was quoted at around 109 cents on Thursday, the people said.

Silver Lake is sitting on more than $100 million of additional gains via a separate purchase of shares from Belinda Johnson, Airbnb’s former chief operating officer, according to figures disclosed in a regulatory filing.

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