(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 capital raise last year and plans to use the proceeds to offset tax burdens associated with stock sales from staffers, Bloomberg reported. The debt raise comes alongside a $10 billion funding round Databricks announced at the end of last year that lifted its valuation to $62 billion.
The debt package includes a $2.25 billion term loan from direct lenders that’s structured as an annual recurring recurring revenue loan and pays 4.5 percentage points over the Secured Overnight Financing Rate, said the people, who asked not to be identified because details of the transaction are private. The financing also 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, they said.
Representatives for Databricks, Blackstone, Apollo, Blue Owl and JPMorgan declined to comment.
ARR loans have become a popular avenue for private credit lenders 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 it will invest proceeds from its $10 billion equity raise in new AI products, acquisitions, and significant expansion of its international go-to-market operations, Bloomberg reported in December. The capital will also be used to buy shares owned by current and former employees. That funding round was led by Thrive Capital with participation from firms including Andreessen Horowitz and DST Global.
In the fiscal year ending in January 2025, Databricks expects to cross $3 billion in annualized revenue. Sales increased more than 60% in the most recent quarter, which ended in October, a rapid pace of expansion at a time when many software makers are struggling with growth.
Databricks makes software to ingest, analyze and build artificial intelligence apps with complicated data from a variety of sources. Its primary competitors are generally considered to be Snowflake Inc. as well as services offered by cloud infrastructure vendors like Microsoft Corp.’s Fabric.
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–With assistance from Brody Ford.
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