Musk’s Twitter Takeover Hits Snag Over Debt-Financing Problem

(Bloomberg) — Talks between Elon Musk and Twitter Inc. to achieve a decision of the $44 billion takeover are caught partially over Musk’s assertion that his supply is now contingent on receiving $13 billion in debt financing, in keeping with individuals acquainted with the matter.

Most Learn from Bloomberg

The billionaire’s legal professionals stated in an Oct. 3 SEC letter that Musk was keen to do the $54.20-per-share deal on its authentic phrases “pending receipt of the proceeds of the debt financing.” The unique deal didn’t comprise such a contingency.

The discussions between the world’s richest man and the social media platform are aimed toward resolving remaining points earlier than closing the deal, which he initially proposed in April after which reneged on. The 2 sides are anticipated to file a movement with the court docket after they have settled all their questions, which might cease the lawsuit that Twitter filed within the aftermath of Musk’s rejection.

Musk can be in search of to order his rights to file a fraud go well with over his claims the platform’s executives misled him and different buyers concerning the variety of spam and robotic accounts amongst its greater than 230 million customers, in keeping with one of many individuals, who requested to not be named discussing personal issues.

Representatives for San Francisco-based Twitter didn’t instantly reply to requests for remark. Musk didn’t reply to an e-mail in search of remark.

Financial institution Debt

Seven banks, led by Morgan Stanley, totally underwrote the debt portion of the financing, in keeping with an April submitting. As is common in this sort of contract, banks initially deliberate to promote most of that debt to institutional cash managers earlier than the Twitter deal closed, however they’ve all the time been on the hook for offering the funding if something went unsuitable.

Story continues

There are only a few, if any, methods for banks to get out of offering such debt commitments after signing the contract. And most banks wouldn’t need to, even when it meant stopping a loss — backing out would replicate poorly on their funding banking enterprise and will hurt their potential to win new offers with corporations and personal fairness companies sooner or later.

If the 2 sides agreed on a decision, a deal might shut rapidly, as quickly as every week, an individual acquainted stated Wednesday. The deal may shut so rapidly that the banks could be anticipated to fund their debt commitments and certain syndicate the providing with buyers after the deal closes, Bloomberg reported.

Learn extra: Twitter LBO Revives $12.5 Billion Headache for Wall Road (1)

Even when the banks have time to promote the debt to cash managers, credit score market situations have deteriorated since April. The Morgan Stanley-led group might wrestle to seek out consumers for all of the bonds and loans and would seemingly should take losses on no less than a part of the financing package deal. However that’s in the end the banks’ drawback, not Musk’s.

Morgan Stanley didn’t reply to a request for remark concerning the Musk deal.

Howard Fischer, associate at legislation agency Moses Singer, sees no authorized foundation for the banks to have the ability to get out of the Twitter debt commitments, he stated in a cellphone interview. “Typically it might be arduous to have offers go ahead in the event that they had been contingent on financial institution financing and that financial institution financing was not rock strong,” he stated.

Shares in Twitter fell 2.4% to $50.07 at 2:05 p.m. in New York. Either side agreed Wednesday to postpone Musk’s long-awaited deposition within the lawsuit, which is aimed toward forcing him to consummate the transaction.

(Updates with remark from lawyer in penultimate paragraph.)

Most Learn from Bloomberg Businessweek

©2022 Bloomberg L.P.