October 24, 2022
Banks such as Morgan Stanley, Bank of America and Barclays, which agreed to finance Elon Musk’s takeover of Twitter, plan to keep the entire $13 billion in debt for the deal rather than sell it.
Sources say the banks have decided to keep the debt on their balance sheets rather than sell it at a loss to bond and loan fund managers, who have become increasingly wary of rising market volatility. Banks are also holding off until there is more investor interest.
Uncertainty over the deal’s completion, as well as Musk’s antics, while claiming that Twitter misled him about the number of spam accounts on the platform, hampered banks’ ability to market the debt. Even debt investors are said to be holding back until Musk’s plan for Twitter’s new leadership and business plan is revealed.
Musk agreed to buy Twitter for $44 billion in April, before the Federal Reserve began raising interest rates to combat inflation, making acquisition financing look too cheap in the eyes of credit investors, and forcing banks to take a financial hit of hundreds of millions of dollars to get it off their books.
Normally, a bank sells the debt used to finance the buyout and moves on to the next transaction, but it now refuses to sell the debt. Twitter’s debt package includes junk-rated loans, which are risky because of the amount of debt the company is taking on, as well as secured and unsecured bonds.
Twitter’s move also has the potential to block the ailing leveraged buyout pipeline by tying up capital that Wall Street might otherwise use to support new deals.
The sources for this piece include an article in Reuters.
