Databricks Inks $5 Billion of Private Credit, Bank Funding

(Bloomberg) — Software maker Databricks Inc. has clinched more than $5 billion of financing from lenders including Blackstone Inc., Apollo Global Management Inc. and Blue Owl Capital Inc. in its largest debt raise to date, according to people with knowledge of the matter.

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The tech firm, which is one of the world’s most valuable closely held companies, tapped JPMorgan Chase & Co. to arrange the financing last year and plans to use the proceeds to offset tax burdens associated with stock sales from staffers, Bloomberg reported. The debt deal comes alongside a $10 billion equity funding round Databricks announced at the end of last year that lifted its valuation to $62 billion.

Direct lenders are providing a $2.25 billion term loan as well as a $500 million delay-draw tranche that Databricks can tap later, said the people, who asked not to be identified because details of the transaction are private. The debt, which has a structure tied to the company’s annual recurring revenue, pays 4.5 percentage points over the Secured Overnight Financing Rate, they said.

A group of banks including JPMorgan, Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley and BNP Paribas SA provided a $2.5 billion revolving credit facility as part of of the debt financing, according to the people.

Representatives for Databricks, Blackstone, Apollo, Blue Owl, JPMorgan, Barclays, Citigroup and BNP declined to comment. Goldman Sachs and Morgan Stanley did not respond to requests for comment.

ARR loans have become a popular avenue for private credit firms to extend loans to fast-growing software companies that are yet to turn a profit. In ARR loans, creditor safeguards are set on measures of a company’s recurring revenue, which is typically based on long-term contracts, instead of earnings.

Databricks said in December it expects to cross $3 billion in annualized revenue and to generate positive free cash flow in its fourth quarter, which ends on Jan. 31. Sales increased more than 60% in the prior three-month period, a rapid pace of expansion at a time when many software makers are struggling with growth.

The company said it will use proceeds from its $10 billion equity raise for new AI products, acquisitions, and a significant expansion of its international go-to-market operations as well as to buy shares owned by current and former employees. Thrive Capital led that funding round alongside firms including Andreessen Horowitz and DST Global.

Databricks makes software to ingest, analyze and build artificial intelligence apps with complicated data from a variety of sources. Snowflake Inc. and some of the services offered by cloud infrastructure vendors like Microsoft Corp.’s Fabric are generally considered its main competitors.

–With assistance from Brody Ford.

(Updates with more details on the financing starting in third paragraph.)