BDC-backed SoundCloud gets much-needed financing: update

Ares and TCP had lent the audio platform operator senior secured debt. 

SoundCloud, a portfolio company of Ares Capital Corporation, has raised its largest equity funding, boosting its financial position after management issued a warning about its ability to operate through the end of the year.

The Berlin-based audio distributor, in which TCP Capital Corporation had also invested, locked down a $169.5 million Series F equity round from Temasek Holdings and The Raine Group, according to CrunchBase, a venture capital and growth-stage financing database. The company announced the news in a Friday blog post.

Ares, which declined to comment, led a $70 million first lien senior secured term loan priced at LIBOR plus 10.5 percent in March, according to the New York-based BDC’s latest quarterly report filed with the US Securities and Exchange Commission.

For its part, Santa Monica, California-based TCP lent a $31.55 million senior secured term loan, priced at LIBOR plus 10.72 percent, its second-quarter earnings results showed. TCP has since been repaid, a firm spokeswoman said, and declined further comment. TCP completed the deal in January 2016, according CrunchBase.

“This [equity] financing means SoundCloud remains strong & independent. As I said, SoundCloud is here to stay,” SoundCloud chief executive officer Alexander Ljung wrote in the blog post. He said in the post that he will step down as CEO but will remain chairman of the company. Kerry Trainor, an advisor to KKR and former CEO of Vimeo, will take over.

In January, when the SoundCloud filed its 2015 financial statements with UK regulators, the company cautioned that it anticipated having enough money to meet its obligations through 31 December but could exhaust its funding sooner than expected.

“Risks and uncertainties… may cause the company to run out of cash earlier than that date, and would require the group to raise additional funds which are not currently planned,” the report read. “These matters give rise to a material uncertainty about the group’s ability to continue as a growing concern.”

In a separate July blog post, Ljung wrote: “There’s an insane amount of noise about SoundCloud in the world right now. And it’s just that – noise,” assuring users that the audio they shared and uploaded “is not going away. Not in 50 days, not in 80 days or anytime in the foreseeable future”. He also said in the post the company laid some staff off to “ensure SoundCloud remains a strong, independent company”.

Ares and TCP both lend to mid-market companies. As of 30 June, the former listed $12.33 billion in assets. TCP had $1.53 billion in assets as of the same date. At the end of the second quarter, 78 percent of Ares’ assets are senior secured loans, while that figure for TCP was 95 percent.

Editor's note: The story has been updated to reflect that TCP has been repaid and SoundCloud is no longer a portfolio company of the BDC.