The $300m raised by US-based wearable technology maker Jawbone from asset manager BlackRock last month was actually provided in the form of debt financing, Bloomberg reported on Monday.
Originally reported as an equity investment, BlackRock’s investment was actually made in the form of a loan secured by Jawbone’s existing and future licenses, intellectual property, royalties and accounts receivable, as well as revenue from intellectual property and licenses, according to a regulatory filing and sources close to the deal.
Founded in 1999, Jawbone initially sold Bluetooth headsets and then Bluetooth speakers, but has found most success producing wearable products including fitness trackers.
Two of Jawbone’s previous lenders, financial services providers Wells Fargo, and private equity firm Silver Lake, have ended their agreements with the company in conjunction with BlackRock’s financing. They provided $93m in debt financing in 2013 together with Fortress Investment Group and JP Morgan.
Jawbone has raised $227m in equity altogether from investors including telecommunications firm Deutsche Telekom, Andreessen Horowitz, Kleiner Perkins Caufield & Byers (KPCB), Khosla Ventures and Sequoia Capital.
Deutsche Telekom backed a $40m funding round in 2011 that also featured KPCB and Yuri Milner. However, following the latest debt provision, BlackRock is now the senior secured lender and in the case of a sale or bankruptcy would be repaid first, before any of the equity investors.
The financing was provided in the wake of much speculation concerning the state of Jawbone’s finances, and its reported difficulty in raising equity funding. Contract manufacturer Flextronics filed a lawsuit against the company in August 2014 over $20m of unpaid bills, though the suit was later settled.