Elon Musk’s bankers are considering offering the billionaire new margin loans backed by Tesla Inc stock. to replace some of the high-interest debt he borrowed on Twitter Inc.
Margin loans are one of many options the banking team led by Morgan Stanley and Musk advisers discussed to ease the $13 billion in debt that Twitter took on in the 44 acquisition. Musk’s billion dollars, people who requested anonymity said. identified because discussions are confidential.
Banks have been forced to finance entire debt packages with their own cash after the credit market downturn and volatile start of Musk’s reign at Twitter made debt difficult to distribute to investors organization. The company estimates it will face an annual interest expense of about $1.2 billion if its current debt structure remains the same, more than a measure of Twitter’s earnings for all of 2021.
Discussions so far have focused on how to replace the $3 billion of unsecured debt on which Twitter pays an interest rate of 11.75%, the maximum that banks have guaranteed Musk when they agree to finance backing the April acquisition, the people said.
The talks are preliminary and no decisions have been made, the people said.
Representatives for Musk did not immediately respond to requests for comment. Twitter and Teslano longer a media department, did not respond to a request for comment.
Representatives for Morgan Stanley were not immediately available for comment and representatives of other lenders – Bank of America Corp., Barclays Plc, BNP Paribas SA, Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Societe Generale SA.
While the $13 billion in debt Musk used to fund the deal is at the Twitter company level, any margin loans against Tesla stock will be made personally by the billionaire. . Still, the swap could still make sense considering that Musk has a significant amount of his own money tied up in Twitter’s equity and that margin loans would have a much lower interest rate than the one. Twitter’s unsecured debt, the people said.
Banks are not expected to attempt to reduce any of Twitter’s debt — including $6.5 billion in term loans and $3 billion in secured bonds — for investors. holding until the new year, when the company can give a clearer picture of Musk’s changes. affected its operations, the people said.
Twitter’s initial funding package includes $12.5 billion in margin lending commitments backed by Tesla stock. That was eventually replaced by additional equity commitments, including investments from several partners.
First published date: December 8, 2022, 08:51 AM IST
