Investing.com -- Databricks Inc., a renowned software maker, has secured over $5 billion in its biggest debt financing round to date, according to report from Bloomberg, citing people with knowledge of the matter. The funding was provided by several lenders, including Blackstone (NYSE:BX) Inc., Apollo Global Management (NYSE:APO) Inc., and Blue Owl Capital.
The tech company, recognized as one of the globe's most valuable private firms, employed JPMorgan Chase & Co (NYSE:JPM) to arrange the capital raise last year. The firm intends to use the raised funds to alleviate tax burdens related to stock sales by its employees.
This debt financing coincides with a $10 billion funding round that Databricks announced at the end of last year, which increased its valuation to $62 billion. The debt package includes a $2.25 billion term loan from direct lenders, structured as an annual recurring revenue (ARR) loan, and pays 4.5 percentage points over the Secured Overnight Financing Rate. The sources, who requested anonymity due to the confidential nature of the transaction, also revealed that the financing includes a $2.5 billion revolving credit facility provided by a large group of banks, including JPMorgan, and a $500 million delayed-draw term loan.
ARR loans have gained popularity as a means for private credit lenders to extend loans to rapidly growing software companies that have yet to make a profit. In ARR loans, the safety measures for creditors are based on the firm's recurring revenue, usually derived from long-term contracts, rather than earnings.
Databricks previously stated that the proceeds from its $10 billion equity raise would be invested in new AI products, acquisitions, and a significant expansion of its international go-to-market operations. The capital will also be used to purchase shares owned by current and former employees. Thrive Capital led that funding round, with participation from firms such as Andreessen Horowitz and DST Global.
By the end of the fiscal year in January 2025, Databricks anticipates surpassing $3 billion in annualized revenue. The company reported a sales increase of over 60% in the most recent quarter, which ended in October, indicating a rapid pace of expansion at a time when many software makers are grappling with growth.
Databricks develops software to ingest, analyze, and build artificial intelligence apps with complex data from a variety of sources. Its main competitors are generally considered to be Snowflake Inc . (NYSE:SNOW) and services offered by cloud infrastructure vendors like Microsoft Corp (NASDAQ:MSFT).'s Fabric.
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