Last updated on April 25, 2014 at 5:25 EDT

Facebook Consolidates Loans And Credit Of $8 Billion Ahead Of IPO

March 8, 2012

In anticipation of its initial public offering (IPO), social network Facebook has secured $8 billion in loans and credit and named 25 new underwriters, according to documents provided to US regulators. Facebook described the loans for working capital and other general corporate purposes, according to the filing.

The loans include a $5 billion five-year revolving line of credit and a $3 billion 364-day bridge loan, Facebook announced 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., report Michael Amato and Brian Womack for Bloomberg.

Facebook´s expanded credit line will aid in covering the potential legal costs of patent litigation with Yahoo. Sunnyvale California-based Yahoo 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.

Over the previous 12 months, Facebook has steadily increased its borrowing. In its previous filing, submitted in early February, Facebook disclosed that it had secured a $1.5 billion line of credit in February 2011, which was raised to $2.5 billion by September.

Last month, Facebook said it had terminated the old $2.5 billion agreement and opened a new $5 billion line of credit, with an expanded group of lenders. Facebook is allowed to borrow up to $2.5 billion from this pool before its initial public offering of stock, writes Evelyn M. Rusli for The New York Times’ DealBook.

Facebook indicated that it intended to pay for the charges related to the vesting of employee stock by selling shares. The additional money will help Facebook compete with larger, more established technology companies, like Google and Apple, particularly for mergers.

The company, which has largely confined itself to small takeovers, will have the ability to tackle larger acquisitions. “It´s competing against some big balance sheets,” Colin W. Gillis, an analyst at BGC Financial, told Rusli. “We could see them augment their organic growth through acquisitions.”

“The pace of their deal making has been significantly below what you see from Google.”

The company´s filing has also detailed its number of active members. The filing claims 432 million mobile monthly active users worldwide as of the end of 2011, a 76 percent increase from the previous year.

Overall, Facebook had 845 million monthly active users. In the amended filing, however, Facebook cautioned that “duplicate accounts may have represented approximately 5-6 percent” of that total.

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Source: RedOrbit Staff & Wire Reports