Banks forced to hold on to Twitter deal debt, sources say

NEW YORK, Oct 21 (Reuters) – The banks that provided $13 billion in financing for Tesla CEO Elon Musk’s acquisition of Twitter Inc have abandoned plans to sell the debt to investors due to uncertainty in around the fortunes and losses of the social media company. people familiar with the matter said.

The banks do not plan to syndicate the debt as is typical in these types of acquisitions and instead plan to keep it on their balance sheets until there is more appetite from investors, the sources said.

Banks, including Morgan Stanley, Bank of America, and Barclays Plc They declined to comment. Representatives for Musk and Twitter did not immediately respond to requests for comment.

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Musk agreed to pay $44 billion for Twitter in April, before the Federal Reserve began raising interest rates in a bid to fight inflation. This made financing the acquisition look too cheap in the eyes of credit investors, so banks would have to take a financial hit totaling hundreds of millions of dollars to get it off their books.

Uncertainty surrounding the finalization of the deal also prevented banks from trading the debt. Musk has tried to get out of the deal, arguing that Twitter misled him about the number of spam accounts on the platform, only agreeing to meet a Delaware court judge’s Oct. 28 deadline to close the deal. transaction earlier this month. He has not disclosed details about Twitter’s new leadership and business plan, and many debt investors are holding back until they get more details about it, the sources said.

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The debt package for the Twitter deal is made up of junk-rated loans, which are risky because of the amount of debt the company takes on, as well as secured and unsecured bonds.

Rising interest rates and heightened market volatility have pushed investors to steer clear of some junk-rated debt. For example, Wall Street banks, led by Bank of America, suffered a $700 million loss in September from the sale of about $4.55 billion in debt backing the leveraged buyout of enterprise software company Citrix Systems. inc.

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In September, a group of banks called off attempts to sell some $4 billion of debt financing Apollo Global Management Inc’s deal to buy Lumen Technologies’ telecom and broadband assets after failing to find buyers.

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Reporting from Anirban Sen and Shankar Ramakrishnan in New York; Additional reporting by Sheila Dang, Abigail Summerville, and Matt Tracy; Edited by Josie Kao

Our standards: the Thomson Reuters Trust Principles.


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