Southeast Asian ride-hailing and payments firm Grab is in talks with banks to secure an up to $500 million loan facility, two sources familiar with the development told DealStreetAsia.
Separately, the SoftBank-backed firm is also exploring a bond option to raise up to $500 million, one of the two sources quoted above said. However, Singapore-headquartered and Cayman Islands-registered Grab is yet to take a call on selling its first-ever bonds to raise debt to fund operations, this source added.
The loan will be a revolving credit facility with a three or five-year tenor and a 5-6 per cent interest rate.
When contacted, Grab said it does not comment on market rumours or speculation.
A revolving loan is a flexible financing tool due to its repayment and re-borrowing accommodations. It allows a business to borrow money as needed for working capital needs and continuing operations.
Term sheets for this revolving loan are set to be issued by this month-end, the second executive quoted above said. The ride-hailing firm may not necessarily tap the facility for financing.
“This is a variable line of credit that gives the company flexibility in future – Grab can borrow money for working capital or acquisitions,” the executive added.
Several unicorns, including global ride-hailing firm Uber (which sold its Southeast Asia business to Grab), China’s Didi Chuxing and Airbnb have raised capital via the bond route over the last couple of years. Investors have lapped up such bonds, indicating their confidence in the long-term potential of these loss-making companies.
Grab is not new to the debt market. It had secured $700 million in debt financing in 2017, including a $500 million five-year asset-backed syndicated facility from HSBC Singapore. That deal was 2.5 times oversubscribed and saw a total of 16 bank and non-bank financial institutions participating.
The Southeast Asian unicorn had last raised money earlier this year when it raked in $856 million from Japan’s Mitsubishi UFJ Financial Group Inc (MUFG) and IT services firm TIS Inc to accelerate the expansion of its financial services. The financing, which was among the largest raised by Grab that has bagged $3 billion from SoftBank Group and $1 billion from Toyota, reportedly valued the company at around $15 billion.
Last month, the ride-hailing platform laid off about 360 employees, representing about 5 per cent of the company’s total workforce, citing the severe impact of COVID-19 on its business and the foreseen prolonged recession as a result of the pandemic. In May, its co-founder Tan Hooi Ling said the company was preparing for a potentially “long winter” as its revenues had taken a severe hit from the coronavirus outbreak.