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Opendoor Builds $9 Billion Debt War Chest to Buy U.S. Homes

The company entered into an amended mezzanine debt facility with a $3 billion limit.

(Bloomberg)—Opendoor Technologies Inc. is adding billions of dollars in borrowing capacity as it races to buy and sell more homes.

The company, the largest of an emerging group of tech-powered home flippers called iBuyers, entered into an amended mezzanine debt facility with a $3 billion limit, according to an Oct. 4 filing. That move, combined with other recent transactions, allows the company borrow as much as $9 billion through non-recourse asset-backed facilities.

Opendoor’s main business involves buying a home, making repairs and putting it back on the market. Access to short-term debt is a crucial ingredient in the process, which also depends on home valuation algorithms and networks of renovation contractors.

It uses senior debt to pay for 80% to 90% of a given home, and mezzanine debt for the balance, according to an August filing. The company’s new $3 billion mezzanine facility gives it room to acquire more than 40,000 homes, based on an average home price of $350,000. The company would need more senior debt to reach that figure.

Opendoor’s main competitor, Zillow Group Inc., has also tapped Wall Street for debt, seeking more than $1 billion in two unrated bond offerings.

Opendoor was up 1.5% at $19.28 as of 1:37 p.m. on Tuesday. The stock had slipped more than 16% this year through Monday’s close.  Zillow shares have also declined so far in 2021. After nearly tripling last year, the stock has dipped more than 35%.

© 2021 Bloomberg L.P.

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