Banks Said to Be Forced to Hold on to Musk’s Twitter Takeover Deal Debt

The banks offering $13 billion (roughly Rs. 1,07,300 crore) in financing for Tesla CEO Elon Musk’s acquisition of Twitter have deserted plans to promote the debt to traders due to uncertainty across the social media firm’s fortunes and losses, individuals conversant in the matter stated.

The banks aren’t planning to syndicate the debt as is typical with such acquisitions, and are as an alternative planning to maintain it on their steadiness sheets till there’s extra investor urge for food, the sources stated.

The banks, which embody Morgan Stanley and Barclays, didn’t reply to requests for remark. Bank of America declined to remark. Representatives for Musk and Twitter didn’t instantly reply to requests for remark.

Musk agreed to pay $44 billion (roughly Rs. 3,37,465 crore) for Twitter in April, earlier than the Federal Reserve began elevating rates of interest in a bid to struggle inflation. This made the acquisition financing look too low cost within the eyes of credit score traders, so the banks must take a monetary hit totaling lots of of hundreds of thousands of {dollars} to get it off their books.

Also stopping the banks from advertising the debt was uncertainty across the deal’s completion. Musk has tried to get out of the deal, arguing Twitter misled him over the variety of spam accounts on the platform, and solely agreed to adjust to a Delaware court docket decide’s October 28 deadline to shut the transaction earlier this month. He has not revealed particulars on Twitter’s new management and marketing strategy, and plenty of debt traders are holding again till they get extra particulars on that entrance, the sources stated.

The debt bundle for the Twitter deal is comprised of junk-rated loans, that are dangerous due to the quantity of debt the corporate is taking over, in addition to secured and unsecured bonds.

Rising rates of interest and broader market volatility has pushed traders to keep away from some junk-rated debt. For instance, Wall Street banks led by Bank of America suffered a $700 million (roughly Rs. 5,777 crore) loss in September on the sale of about $4.55 billion (roughly Rs. 37,556 crore) in debt backing the leveraged buyout of enterprise software program firm Citrix Systems.

In September, a bunch of banks canceled efforts to promote about $4 billion (roughly Rs. 33,016 crore) of debt that financed Apollo Global Management’s deal to purchase telecom and broadband belongings from Lumen Technologies after failing to seek out patrons.

© Thomson Reuters 2022