Facebook Planning to Seek Higher Credit Line to Face Tax Obligation: Report

Facebook is planning to raise its $2.5 billion credit line to facilitate paying taxes on its employees' restricted stock units when they vest six months after the company's initial public offering.

Going by the report by Reuters, the firm is attempting to take advantage of its position to get more finance. Facebook, which has filed the prospectus for its initial public offering seeking to raise $5 billion in initial funding, is yet to set its price range for the IPO.

According to the filing, Facebook first turned a profit in 2009 when it earned $229 million on $777 million in sales.

At the end of 2011, the company had $3.9 billion in cash and marketable securities, up from $1.8 billion at the end of 2010. Still, it will need billions of dollars to face the big tax hit.

Facebook has seen its user base grow phenomenally over time. Now, it has to be seen how its share prices are going to grow with the advent of IPO. Along with the rise of share price the tax obligation will also increase, which will mean it will have to increase its present borrowing capacity of $2.5 billion.

With the IPO approaching, it is a suitable time for Facebook to arrange credit facilities as banks competing for beneficial part in equity offers will be willing to take special care of the company's requirements.