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Comment by codingdave | Hacker News Reader

> "to refinance its debt"

So I take that to mean that this is not a new loan of $3B, they are already that far underwater, and are refinancing for better terms.

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As I understand it they have already borrowed around $1B, and now because of the lower interest rate, they are able to secure a bigger loan that they'll use to pay back the original and then still have a bucket of cash, at a lower interest.

I don't know about the US, but here in Denmark it has been a common "trick" in mortgage financing as the interest rate dropped over the last couple of decades.

But as with all taking on debt to pay off debt, it's like wetting yourself.

The best part is what happens when they cannot refinance anymore. There is a wall in front of the car, but speeding is fun, so why not accelerate a bit more.

>The best part is what happens when they cannot refinance anymore.

they'll 'exit' before that by IPO

ByteDance is barred from IPO'ing internationally and possibly domestically as well. They wanted to and the CCP would not allow it, they capitulated and backed off their IPO plans (Didi by contrast went forward against the wishes of the CCP, and now Didi is being dismantled and nationalized in response). It's part of the new cultural revolution going on in China, they're restricting prominent companies more aggressively, for purposes of control, and that includes how and when they're allowed to IPO.

It’s about control, of course, but someone will end up with control (as always happens in a power vacuum). The decision is whether you want your government in control or enormously powerful corporations. China picked the former, other countries picked the latter.

HK IPO

They made $37bn revenue and $684m profit (presumably post-debt-payments) last year, so I don't think that line of credit will be terribly challenging for them to repay.

Less than a billion profit from 37 billion revenue? Isn't that too low for internet company?

Like wetting yourself... to stay warm?

> But as with all taking on debt to pay off debt, it's like wetting yourself.

Feels like something didn't translate well from Danish to English in that saying:)

Ingvar Kamprad (founder of IKEA) famously said that entering the stock market is like peeing yourself: "first it becomes warm, warm. then it becomes cold, cold"

> But as with all taking on debt to pay off debt, it's like wetting yourself.

Taking on debt at a lower interest rate to pay off debt at a higher interest rate is just common sense.

Taking on additional debt just to have a bucket of cash is what can potentially get you in trouble if there is no plan or resolve to use it productively.

Having debt doesn’t make a company underwater. If you can use that debt to generate more revenue than it cost to service the debt it makes absolute financial sense to do so.

Basically every major corporation in the world right now has large debt in the form of lines of credit. It’s too cheap not to right now. Especially for a company that doesn’t have easy access to institutional investors.

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