In contrast to how these kinds of deals usually go, the banks don’t plan to pool the loan with other banks.
a.m. People with knowledge of the situation say that the banks that gave Tesla CEO Elon Musk $13 billion to buy Twitter Inc (TWTR.N) have given up on plans to sell the debt to investors because they don’t know how much money the social media business will make or lose.
Sources say that the banks don’t plan to syndicate the debt, which is what they usually do when they buy something like this. Instead, they plan to keep it on their balance sheets until there is more investor interest.
The banks, which also include Barclays Plc (BARC.L), Bank of America, and Morgan Stanley, declined to comment. Requests for a response were not immediately answered by Musk or Twitter representatives.
In April, before the Federal Reserve began hiking interest rates to combat inflation, Musk agreed to pay $44 billion for Twitter. The banks would have to suffer a financial damage totaling hundreds of millions of dollars to get the purchase financing off their books because this made the acquisition financing appear too cheap in the eyes of credit investors.
Uncertainty regarding the deal’s completion prevented the banks from promoting the debt as well. Musk has attempted to back out of the agreement, claiming Twitter deceived him about the volume of spam accounts on the network. He only decided to follow a Delaware court judge’s order earlier this month to complete the transaction by the deadline of October 28. According to the sources, many debt investors are waiting until they hear more about Twitter’s new leadership and business plan. This is because he hasn’t said anything yet.
The dangerous junk-rated loans, secured and unsecured bonds, and the amount of debt the corporation is taking on make up the debt package for the Twitter transaction.
Investors are being urged to steer clear of some junk-rated securities due to rising interest rates and general market instability. For example, Wall Street banks led by Bank of America lost $700 million when they sold the $4.55 billion in debt that was used to help Citrix Systems Inc. do a leveraged buyout.
A group of banks gave up trying to sell $4 billion in debt that had been used to pay for Apollo Global Management Inc.’s purchase of telecom and internet assets from Lumen Technologies in September because they couldn’t find buyers.
