Banks forced to hold on to Twitter deal debt-sources

By Anirban Sen and Shankar Ramakrishnan

NEW YORK (Reuters) – The banks providing $13 billion in financing for Tesla (NASDAQ:) CEO Elon Musk’s acquisition of Twitter Inc (NYSE:) 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 (NYSE:) and Barclays (LON:) Plc, did not respond to requests for comment. Bank of America (NYSE:) 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 Oct. 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 Inc (NASDAQ:).

In September, a group of banks canceled efforts to sell about $4 billion of debt that financed Apollo Global Management (NYSE:) Inc’s deal to buy telecom and broadband assets from Lumen Technologies after failing to find buyers.

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