NEW YORK: Because of the uncertainties surrounding the profits and losses of the social media business, the banks providing $13 billion in financing for Tesla CEO Elon Musk’s acquisition of Twitter Inc (TWTR.N) have abandoned plans to sell the debt to investors, according to individuals familiar with the situation.
The banks want to maintain the debt on their balance sheets until there is significant investor interest, not syndicate it as is typical with such acquisitions, according to the sources. The banks, which also include Barclays Plc (BARC.L), Bank of America, and Morgan Stanley, declined to comment. Requests for 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. Because this made the acquisition financing appear too cheap in the perspective of credit investors, the banks would have to suffer financial losses up to hundreds of millions of dollars to get the purchase financing off their books.
The banks were unable to market the debt because they were uncertain about the deal’s success. With the justification that Twitter misled him about the number of spam accounts on the network, Musk has made an attempt to break the agreement. He simply chose to comply with the judge’s directive to finalise the deal by the deadline of October 28 earlier this month. He has not divulged any details regarding Twitter’s new leadership.