The lenders behind the $12.7 billion that Tesla CEO Elon Musk borrowed to finance his Twitter acquisition admit they’ll likely hold the debt for a long time whilst the company’s new owner works on a clearer business plan for the company.
According to individuals familiar with the matter cited by the Financial Times, the banks that lent Musk funds to finance his $44 billion Twitter takeover— including Morgan Stanley, Bank of America, and Barclays, concede they are stuck holding the $12.7 billion in debt until sometime next year, while likely incurring substantial losses. The group of banks have allegedly held brief talks with several major credit investors over the past several weeks to determine what level of demand there is for debt package, and what sort of discounts they will need to offer to offload it.
The lenders acknowledged it will be easier to find a buyer for the debt once Musk unveils a more clearer business strategy, including details of potential cost-cutting measures and financial performance estimates for 2023 and 2024. The debt package will likely be offered in the form of fixed-rate bonds, and consists of a $6.7 billion term loan, as well as $3 billion each of unsecured debt and secured bonds. “My guess is Twitter has a lot of fat,” one potential debt buyer was quoted as saying. “In the case of Twitter and Elon Musk, there are material things he can do to change the business.”
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People with knowledge of the matter said the bankers are going to offer a portion of the debt to finance the takeover of car parts supplier Tennaco by Apollo this week, during which they will also get a more defined idea of the potential yields investors will demand. Still, the lenders are anticipating to incur losses upwards of $1 billion on the debt package, contingent on the level of market stability.
Information for this briefing was found via the Financial Times. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
