Banks Funding Elon Musk’s Twitter Deal Raises Concerns: Full Details

NEW YORK: Banks providing $13 billion in financing for Tesla CEO Elon Musk’s acquisition of Twitter Inc have abandoned plans to sell the debt to investors due to uncertainty surrounding fortunes and losses from the social media company, people familiar with the matter said.

The banks do not plan to syndicate the debt as is usually the case with such acquisitions, and instead plan to keep it on their balance sheets until there is more appetite from investors, the sources said. .

The banks, including Morgan Stanley and Barclays Plc, did not respond to requests for comment. Bank of America declined to comment. Representatives for Musk and Twitter did not immediately respond to requests for comment.

Musk agreed to pay $44 billion for Twitter in April, before the Federal Reserve began raising interest rates in a bid to fight inflation. This made financing the acquisition too cheap in the eyes of credit investors, so the banks would have to take a financial hit totaling hundreds of millions of dollars to get it off their books.

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The uncertainty surrounding the conclusion of the operation also prevented the banks from marketing the debt. Musk tried to back out of the deal, arguing that Twitter misled him about the number of spam accounts on the platform, and only agreed to comply by the October 28 deadline. set by a Delaware court judge to complete the transaction earlier this month. He did not reveal details about Twitter’s new management and business plan, and many debt investors are holding back until they get more details about it, the sources said.

The debt package for the Twitter deal includes subprime loans, which are risky due to the amount of debt the company has taken on, as well as secured and unsecured bonds.

Rising interest rates and increased market volatility caused investors to stay away from certain risky debts. For example, Wall Street banks led by Bank of America suffered a $700 million loss in September on the sale of about $4.55 billion in debt backing the software company’s leveraged buyout. company Citrix Systems Inc.

In September, a group of banks called off efforts to sell about $4 billion in debt that funded Apollo Global Management Inc’s deal to buy telecommunications and broadband assets from Lumen Technologies after it failed to find buyers.

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Michael J. Birnbaum