Zynga’s New $1 Billion Credit Line Could Double its Acquisition Warchest, Or Give It Time Amid Market Volatility

Zynga set up a revolving credit agreement in July, allowing it to borrow up to $1 billion in revolving loans, according to an amended IPO filing released today. This could help the company make big ticket acquisitions, especially as it looks to break into mobile gaming. It could also give Zynga some flexibility around when it wants to make its public offering, especially considering volatility in global equity markets in recent weeks.

The company didn’t say what the credit facility was for. However, with the $996 million in cash and cash equivalents the company carries on its balance sheet, the $1 billion facility could go toward helping Zynga make some very large acquisitions. We had heard that Storm8 and Zynga had had some initial talks before the mobile-social gaming company started looking more seriously at funding options, and AllThingsD said that the company may have looked at Rovio as a potential target.

A large deal would represent a significant shift in Zynga’s acquisition strategy to date, which has mostly centered on making small talent acquisitions below or around the $10 million range. The revised IPO filing also shows that Zynga paid $7.5 million for an acquisition in July, probably for Toronto’s Five Mobile, but the filing doesn’t specify. Newtoy has been the exception at a price of $53.3 million in cash and stock, excluding retention bonuses. Anything in the hundreds of millions or even above a billion would be far different than what Zynga has done before.

The company paid upfront fees of $2.5 million for the credit agreement and is required to pay commitment fees of up to $625,000 a quarter based on the portion of the credit facility it draws down. Morgan Stanley, which is also the lead bookrunner on the company’s forthcoming IPO, is managing the agreement. The interest rate on the loans are tied to daily interbank rates and can also change depending on how much debt Zynga has relative to its EBITDA.