TikTok's parent company ByteDance is eyeing a US$9.5 billion loan from banks, which would mark the biggest dollar-denominated corporate facility in Asia ex-Japan, according to reports.
Banking institutions like Citigroup, Goldman Sachs, and JP Morgan are showing interest in the loan deal, which has a three-year tenure with the flexibility to extend the repayment period up to five years under certain circumstances, Bloomberg reported citing people familiar with the matter.
Securing this substantial loan indicates ByteDance's eagerness to access Asia's liquid loan market, especially in light of a 44% decline in dollar loan volume this year. The new loan will refinance a previous $5 billion facility, address working capital needs, and includes a greenshoe option that would allow ByteDance to increase the total amount beyond $9.5 billion, with an interest rate set at 85 basis points above the Secured Overnight Financing Rate (SOFR).
According to Bloomberg data, Asia's dollar loan volume fell 44% to $45.5 billion in the first half of the year, the lowest amount since 2010, excluding bilateral facilities.
This strategic move comes as ByteDance is looking to explore the possibilities of e-commerce and generative AI. In its home turf, it gained popularity for investing billions of dollars into research and development of large language models and ChatGPT-style apps. TikTok also plans to bring its live shopping platform to more European regions.
Founded in 2012, ByteDance quickly rose to prominence with its mobile application Douyin, which has become the most widely-used mobile-video application in China. It is also the parent company of TikTok, a social media app popular in the U.S. ByteDance is currently contesting a recent U.S. law that could force it to sell or shut the U.S. operations.
The Justice Department previously said that TikTok poses a national security threat by potentially allowing the Chinese government to access American user data and manipulate the content viewed by U.S. users.
TikTok countered these claims and said its recommendation algorithm and user data are securely stored on U.S.-based cloud servers managed by Oracle. TikTok, the popular video app, also stated that all content moderation decisions affecting American users are made within the United States.
Additionally, in April, President Joe Biden signed a bill into law setting a deadline of Jan. 19, 2025, for ByteDance to divest TikTok's U.S. assets, or the app could face a ban.
