Music streaming service Spotify has reportedly raised $1bn in debt financing to compete with its rivals Apple, Google and others.
Citing people familiar with the matter said, the Wall Street Journal (WSJ) reported that private-equity firm TPG, Dragoneer Investment Group and clients from Goldman Sachs Group participated in the deal.
The transaction is anticipated to close at the end of this week.
TPG partner David Trujillo said that the financing would give Spotify the strategic resources to further strengthen their leadership position.
Spotify was valued at $8.5bn in June 2015. Launched in 2008, Spotify has risen fast among the ranks of other streaming music services in the market like Rdio, Beats Music and Google Play Music.
It earlier raised more than $500m in equity funding.
The structure of the latest financing agreement could place strict conditions on Spotify. It will have to pay annual interest on the debt, which starts at 5% and increases by 1% every six months, until the company either goes public or it reaches 10%.
According to the WSJ, TPG and Dragoneer are also allowed to cash in their shares as soon as 90 days following an IPO, rather than the normal six months.
The shares would cost Spotify’s debt providers 20% less than the market rate, a discount that increases over time.
Spotify posted a net loss of €162m in 2014, the last year for which it disclosed financial results. Revenue increased 45% to €1.08bn, compared to €747m for the same period in 2013.
Spotify is increasing its business rapidly despite the financial losses. It is estimated to have 60m total users and 15m paid users
Several companies are focusing on streaming music, which is considered to still have space to increase.
Music hosting service SoundCloud recently unveiled its own on-demand music subscription service to compete with Spotify and others.
