Elon Musk’s antics have made life tough for banks that are helping finance his takeover of Twitter, the media reported.<\/p>\n\n\n\n
According to a report in the Wall Street Journal citing sources, Morgan Stanley, Bank of America and Barclays are finding it hard to hold all $13 billion of debt backing the deal rather than sell it.<\/p>\n\n\n\n
Banks would likely face losses of around $500 million or more if they tried to sell Twitter’s debt at current market prices.<\/p>\n\n\n\n
A bank generally sells the debt used to create a buyout, and moves on to the next deal.<\/p>\n\n\n\n
However, “the Twitter move threatens to bring the faltering leveraged-buyout pipeline to a standstill by tying up capital that Wall Street could otherwise use to back new deals”, the report said late on Friday.<\/p>\n\n\n\n
Musk and Twitter have time till October 28 to close the $44 billion takeover deal.<\/p>\n\n\n\n
Banks signed agreement in April to provide Musk with the debt financing he needed to buy the company.<\/p>\n\n\n\n
“They had originally intended to find third-party investors, such as loan asset managers and mutual funds, who would ultimately lend the money as is customary in leveraged buyouts,” said the report.<\/p>\n\n\n\n
However, rising interest rates and growing concerns about a recession have “cooled investors’ appetite for risky loans and bonds”.<\/p>\n\n\n\n
Admitting that he is “obviously” overpaying to acquire Twitter, Elon Musk has said that the micro-blogging platform has great potential in the long term.<\/p>\n\n\n\n
In an earnings call after posting strong Tesla quarterly results, Musk said this week that Twitter has “incredible potential”.<\/p>\n\n\n\n
“The long-term potential for Twitter, in my view, is an order of magnitude greater than its current value,” he told analysts.<\/p>\n\n\n\n
“I am excited about the Twitter situation because obviously, I know that part incredibly well. And I think it’s massive and has sort of languished for a long time but has incredible potential,” the world’s richest man noted.<\/p>\n\n\n\n
“Although obviously, myself and the other investors are obviously overpaying for it with Twitter right now,” Musk added.<\/p>\n\n\n\n
Musk is likely to sell a portion of his shares in Tesla to help finance the close of that $44 billion take private deal.<\/p>\n","protected":false},"excerpt":{"rendered":"
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