Banks Forced To Hold On To Twitter Deal Debt: Report

The 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 because of uncertainty around the social media...

Banks that provided $13 billion in financing for Tesla CEO Elon Musk's takeover of Twitter Inc have abandoned plans to sell debt to investors due to uncertainty over the social media company's fortunes and losses, people familiar with the matter said.

Banks do not plan to accumulate debt as usual in these acquisitions

Instead, the sources said, they plan to keep it on their balance sheets until there is more investor appetite.

The banks, which includes 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 Twitter $44 billion in April, before the Federal Reserve began raising interest rates in an effort to combat inflation. This made acquisition financing look very cheap in the eyes of credit investors, so the banks had to take a financial hit totaling hundreds of millions of dollars to get it off their books.

Preventing banks from marketing debt was also the uncertainty about the completion of the deal. Musk tried to walk out of the deal, arguing that Twitter misled him about the number of spam accounts on the platform, only agreeing to comply with an October 28 deadline set by a Delaware court judge to close the deal earlier this month.

The sources said he did not reveal details about Twitter's new leadership and business plan, and that many debt investors are holding back until they get more details on this front.

The debt package for the Twitter deal consists of junk loans, which are risky due to the amount of debt the company takes on,

As well as secured and unsecured bonds.

Higher interest rates and broader market volatility have prompted investors to move away from some debt rated as junk. For example, Wall Street banks led by Bank of America suffered a loss of $700 million in September from a sale of about $4.

55 billion in debt to support the leveraged buyout of business software company Citrix Systems Inc.

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

BY
ProBuzzFeed