Spotify has secured a $200m credit facility from lenders including Morgan Stanley, bringing the Swedish music company a step closer to a potential initial public offering in the US, according to people close to the deal.
The Stockholm start-up, which last year sold equity that implied a valuation of $4bn, has long refused to comment on speculation that it is preparing for a multibillion-dollar IPO.
But the lossmaking company’s move to secure a large credit facility – and the banks’ willingness to provide one – will be widely interpreted as a sign that it is preparing to go public.
Investment banks have tripped over themselves to provide credit facilities to fast-growing companies in the hope of winning an underwriting role when the company floats.
Twitter, Facebook and Zynga all received financing packages ahead of their IPOs.
Large banks tend to avoid lending to start-ups, which, unlike traditional corporate borrowers, lack a long financial record, therefore forcing the banks to hold more capital in reserve to cover potential loan losses.
Spotify’s credit facility for about $200m was arranged at the end of last year by Morgan Stanley, Credit Suisse, Deutsche Bank and Goldman Sachs, according to people familiar with the matter.
It has yet to draw upon the credit line, one person added.
The banks and the company declined to comment.
Goldman Sachs is also an investor in the company. Other prominent shareholders include Daniel Ek, the founder and chief executive, and Hong Kong billionaire Li Ka-shing.
With more than 6m paying subscribers, Spotify is the leading company in the fast-growing world of online music streaming. Its competitors include Deezer, Rhapsody and, as of this year, Beats Music, a service from the backers of headphones maker Beats by Dre.
Spotify last week caused a stir in the music industry with the acquisition of The Echo Nest, a technology company that powers the music recommendations of many of its rivals. The deal provides technology that will help Spotify battle online radio specialists such as Pandora and Apple’s iTunes Radio.
The company charges up to $10, €10 or £10 a month for unlimited access to a library of more than 20m songs. To attract new users, it also offers a restricted version of its service for free.
Spotify’s revenues more than doubled to €435m in 2012, according to its latest financial statements. But the company’s losses widened to €59m, as it had to pay out the bulk of its revenues to record labels and music publishers.