SINGAPORE -- Singapore-based digital unicorn Grab has raised $2 billion in the company's biggest ever loan financing, it said Monday, to increase cash liquidity as it faces the prospect of digital competition heating up post-pandemic.
The funding was structured as a five-year term loan, according to the company, with interest rate at 450 basis points over LIBOR, the benchmark rate at which global banks lend to one another.
The proceeds are likely to be used for the company's existing services such as food delivery and ride-hailing. Grab said it will continue to "strengthen its super app ecosystem to support Southeast Asia's daily essential consumer needs."
Since it was set up in 2012, Grab has raised billions of dollars mainly through equity. Among key investors in the past fundraising rounds were SoftBank Group, Toyota Motor and Microsoft. The latest loan financing would "help broaden Grab's sources of financing and establish a long-term, diversified capital structure," the company said.
The latest funding comes as competition among Southeast Asia's digital startups heats up amid accelerated digitalization due to the pandemic.
Singapore-based online gaming and e-commerce group Sea, the region's most valuable listed company worth over $100 billion, has heavily invested in grabbing market share. It raised nearly $3 billion in new share offerings in December for further expansion, especially in digital finance. In this area, Grab and Sea will come head-to-head as both recently won digital banking licenses in Singapore.
Grab's archrival Indonesia-based unicorn Gojek has also recently raised $150 million from local telecom operator giant Telkomsel. Gojek has been in talks about a potential merger with another local unicorn Tokopedia, which, if successful, will form a huge digital tech group in the region's biggest economy.
Grab, which was last valued at $14.3 billion, according to CB Insights, is rapidly emerging from pandemic pains. Its ride-hailing business was hit hard by pandemic-induced travel curbs last year, but its delivery services grew fast. Last month, Grab said group revenues had returned to "well over 100% of pre-COVID levels." And Grab's financial unit had earlier this year raised $300 million.
In conjunction with the loan, Moody's Investors Services and S&P Global Ratings assigned "B3" and "B-" ratings to Grab, respectively. Both gave the company a "stable" outlook.
The loan financing would bring Grab's cash reserves to over $5 billion. Moody's said in a rating statement last month that Grab's cash balance after the loan financing would be "sufficient to cover negative operating cash flow, capital spending at its transport and food delivery businesses and scheduled debt service costs over at least the next three years."
Grab CEO Anthony Tan said in a statement that his company "will invest in building a long lasting, multi-local services business, so that millions of Southeast Asians can support their families and improve their lives with our everyday services."