Global investment company Temasek provided a $200 million loan to support Rent the Runway’s investment into its subscription fashion rental business.
Temasek tweeted it was “transforming the way women get dressed through the concept of renting instead of buying clothes” by providing the loan.
According to an article on recode.net linked to the tweet, Rent the Runway plans to expand the selection of clothing available to subscribers and invest in its logistics operations, which could improve the speed of sending out new orders and dealing with returns, according to the company’s Chief Financial Officer Scarlett O’Sullivan.
Some of the new funds are also being used to refinance a previous debt agreement that Rent the Runway had secured years ago when its business was not strong enough to negotiate terms as favorable as it could now.
The company chose a debt option over typical equity financing, because the loan lets the company “access funds when it makes sense for the business,” O’Sullivan said, rather than committing to one giant lump sum up front.
Previously the company raised more than $200 million from investors, including Bain Capital, KPCB, Highland Capital and TCV.
Temasek received some warrants as part of the deal, which gives the investor the right to buy shares in the company in the future at a predetermined price.
“To be blunt, equity was not a consideration,” Sullivan said. “The debt facility does give us a lot of runway so there are a lot of strategic paths ahead of us.”
