Elon Musk has assured creditors that they will not lose money on the purchase of Twitter
Elon Musk has privately assured some of the bankers who lent him $13 billion to buy Twitter that they will not lose any money on the deal. This was reported by The Financial Times with reference to its sources.
The billionaire had to give verbal guarantees to reassure creditors as the value of the social network, now renamed X, has plummeted since he bought it last year. The deal was financed by seven banks: Morgan Stanley, Bank of America, Barclays, MUFG, Mizuho, BNP Paribas and Société Générale. The sources did not specify when Musk made his statements, but one of them said that the businessman had spoken about it several times. Investors are still puzzled by his actions: he tried to withdraw from the deal before it closed, and recently scared off major advertisers from the platform.
At the end of last year, large hedge funds and credit investors from Wall Street had already held talks with banks, offering them to buy back some of the debt at the rate of $0.65 for $1.00. When the Financial Times contacted them later, they replied that it was not possible to set a purchase price for the bonds and loans at this time: it was not yet possible to assess whether the company’s CEO, Linda Yaccarino, would be able to fix the situation. One multibillion-dollar company specializing in distressed debt characterized debt X as “uninvested.”
Selling $12.5 billion worth of bonds at less than $0.60 for $1.00 would mean a loss of at least $4 billion before interest payments. The debt is split between $6.5 billion in term loans, $6 billion in bonds and $500 million in revolving credit facilities. Banks keep the debt on their balance sheets and do not sell it at a loss, as they hope that after cost-cutting measures, X will improve. There are no plans for an immediate sale, although there are no guarantees that the debt will be repaid even in 2024.
Musk’s verbal guarantees are not backed by any formal obligations – the businessman emphasizes that he has never let his creditors down. Some on Wall Street may be skeptical, but Forbes estimates his wealth at about $243 billion, and this is a powerful argument for bank boards that continue to hold debt on their balance sheets. Morgan Stanley, the largest lender in the deal, reported a $365 million loss in January after revaluing corporate loans it planned to sell and after hedging loans. But banks rarely share information on specific bonds or loans – they often report write-downs on several transactions at once.
Last week, the analytical company Sensor Tower published a report according to which the total advertising spending in the US by the top 100 advertisers X in November 2023 decreased by almost 45% compared to October 2022, when Musk became the owner of Twitter.
Let us remind you that Elon Musk “told advertisers who left X to go to hell” (video)
