The banks providing $13 billion in financing for Tesla CEO Elon Musk's acquisition of Twitter have abandoned plans to sell the debt to investors because of uncertainty around the social media company's fortunes and losses, people familiar with the matter said.
The banks are not planning to syndicate the debt as is
typical with such acquisitions, and are instead planning to keep it on their
balance sheets until there is more investor appetite, the sources said.
The banks, which include Morgan Stanley and Barclays, did
not respond to requests for comment. Bank of America declined to comment.
Representatives for Musk and Twitter did not immediately respond to requests
for comment.
Musk agreed to pay $44 billion for Twitter in April, before
the Federal Reserve started raising interest rates in a bid to fight inflation.
This made the acquisition financing look too cheap in the eyes of credit
investors, so the banks would have to take a financial hit totaling hundreds of
millions of dollars to get it off their books.
Also preventing the banks from marketing the debt was
uncertainty around the deal's completion. Musk has tried to get out of the
deal, arguing Twitter misled him over the number of spam accounts on the
platform, and only agreed to comply with a Delaware court judge's October 28
deadline to close the transaction earlier this month. He has not revealed
details on Twitter's new leadership and business plan, and many debt investors
are holding back until they get more details on that front, the sources said.
The debt package for the Twitter deal is comprised of
junk-rated loans, which are risky because of the amount of debt the company is
taking on, as well as secured and unsecured bonds.
Rising interest rates and broader market volatility has
pushed investors to stay away from some junk-rated debt. For example, Wall
Street banks led by Bank of America suffered a $700 million loss in September
on the sale of about $4.55 billion in debt backing the leveraged buyout of
business software company Citrix Systems.
In September, a group of banks canceled efforts to sell
about $4 billion of debt that financed Apollo Global Management's deal to buy
telecom and broadband assets from Lumen Technologies after failing to find
buyers. © Reuters
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