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Video How Syria’s citizen journalists upload videos Kim Dotcom insists he will fight piracy charges How Facebook makes money - Tech Tonic Nerve repair procedure helps paralyzed rats Follow Reuters Facebook Twitter RSS YouTube Read Red Cross aid convoy reaches Homs | 9:52am EST Conservative activist Andrew Breitbart dead at 43 01 Mar 2012 Wall Street dips, eyes on oil prices | 10:04am EST Anti-U.S. emotions run high at Afghan dogfighting ring 9:54am EST Federal authorities bust $325 million Chinese-U.S. counterfeit 9:06am EST Discussed 92 Conservative activist Andrew Breitbart dies: LA coroner 51 Romney and Santorum in tight race in Michigan 48 Senate heads for showdown over contraceptives Watched China boom drives record profits for Audi Thu, Mar 1 2012 U.S. Navy kicks off rail gun tests with a bang Tue, Feb 28 2012 Jobless Greek in shooting drama Thu, Mar 1 2012 Exclusive: Facebook seeking bigger credit line Tweet Share this Email Print Related News Zynga seeks own game space away from Facebook Thu, Mar 1 2012 Facebook woos Madison Ave in pre-IPO mobile push Thu, Mar 1 2012 UPDATE 5-Facebook woos Madison Ave in pre-IPO mobile push Wed, Feb 29 2012 Yahoo threatens Facebook as patent war looms Tue, Feb 28 2012 Obama urges corporate tax cut, closing loopholes Wed, Feb 22 2012 Analysis & Opinion Corporate state taxes vary widely, depend on industry, location and longevity, study finds Senator Levin unhappy with Facebook’s pending $3 billion tax break Related Topics Tech » Media » Facebook » Related Video U.S. Morning Call: Facebook seeks bigger credit line Thu, Mar 1 2012 How Facebook makes money - Tech Tonic Facebook Vice President of Product Chris Cox delivers a keynote address at Facebook's ''fMC'' global event for marketers in New York City February 29, 2012. Credit: Reuters/Mike Segar By Alistair Barr SAN FRANCISCO | Fri Mar 2, 2012 10:10am EST SAN FRANCISCO (Reuters) - Facebook Inc plans to increase its $2.5 billion credit line to help cover a major tax hit when employee stock awards vest shortly after it goes public, according to two sources familiar with the company's plans. The world's largest social media network, which boosted its borrowing capacity by two-thirds just six months ago, is taking advantage of its strong position to get more financing for its phenomenal growth, the sources said. The sources spoke on condition of anonymity because they are not authorized to speak publicly about such plans. A spokesman for Facebook declined to comment. "All these tax obligations are being created and you need cash to take care of it. You see this all the time but in this case it will be substantial," said Michael Moe of GSV Capital, which owns Facebook shares. "Having the cash to be able to take care of that makes a lot of sense. That would be the motivator of a larger credit facility." Facebook has said it plans to pay taxes on its employees' restricted stock units, or RSUs, when they vest six months after the company's initial public offering. The exact amount is likely to total billions of dollars, based on Facebook's stock price at the time. Helping employees cover tax on RSUs is relatively unusual and leaves the employer with a "very expensive obligation" that could increase if Facebook shares climb, said Bart Greenberg, a partner at law firm Haynes and Boone LLP who advises start-up tech companies. "It could create such a large cash obligation that it eats up most of the credit facility," Greenberg added. "That facility may have been originally set aside for acquisition opportunities or working capital." Facebook said it may sell equity securities, tap its credit facility, use cash or a combination of these options to meet its tax obligation, according to its IPO filing. In February 2011, Facebook set up a $1.5 billion credit agreement with affiliates of Morgan Stanley, J.P. Morgan, Goldman Sachs, Bank of America's Merrill Lynch and Barclays Capital, the leading underwriters of the company's IPO. In September 2011, the borrowing capacity was increased $2.5 billion. "The golden rule of finance is that you get the money when you can, not when you need it," said Moe, who co-founded investment bank ThinkEquity. "Creating maximum flexibility will allow you to be efficient with your use of capital but also opportunistic when appropriate." Some other tech companies that recently went public have also arranged similar credit facilities. Zynga, the social games giant, set up a $1 billion facility with some underwriters of its IPO, which happened late last year. Facebook and Zynga generate substantial profits, but the companies have big credit facilities because it is good corporate finance strategy to line up back-up cash from a position of strength, Moe and others said. The months leading up to an IPO are a good time for companies to arrange credit facilities because they have the most negotiating power with banks vying for lucrative roles in equity offerings, according to the chief financial officer of a large private tech company who asked not to be identified. (Reporting By Alistair Barr; Editing by Richard Chang) Tech Media Facebook Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above. 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