Twitter Buyout Loans Get Bid at 60 Cents as Banks Sound Out Buyers

(Bloomberg) — Wall Road banks that lent $13 billion to assist fund Elon Musk’s buyout of Twitter Inc. have been quietly sounding out hedge funds and different asset managers for his or her curiosity in a bit of the buyout debt at deeply discounted costs.

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Some funds have supplied to take a chunk of the mortgage package deal at a reduction as little as 60 cents on the greenback, which might be among the many steepest markdowns in a decade. The banks have to date deemed these bids unattractive, based on folks with data of the discussions who requested to not be recognized as a result of the talks have been non-public.

The lukewarm investor reception exhibits simply how massive of an albatross the Twitter debt is turning into for a Morgan Stanley-led cohort that dedicated to finance Musk’s acquisition of the social-media agency again in April, earlier than credit score markets cratered. The seven banks are actually saddled with dangerous loans that they by no means supposed to maintain on their books, and face an more and more uphill battle to attenuate losses.

Learn extra: Twitter’s Massive Debt Payments Add Urgency to Musk’s Turnaround Plans

Discussions to date have centered across the $6.5 billion leveraged mortgage portion of the financing, the folks mentioned. Banks had appeared unwilling to promote for any worth under 70 cents on the greenback, one of many folks mentioned. Even at that degree, losses might run into the billions of {dollars}, Bloomberg calculations present.

The discussions have been casual, and there’s no certainty that they may result in an settlement, the folks mentioned.

Barclays Plc, BNP Paribas SA, Mizuho Monetary Group Inc. and Mitsubishi UFJ Monetary Group Inc. declined to remark. Financial institution of America Corp., Morgan Stanley and Societe Generale SA didn’t reply to requests for remark.

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Massive Buyouts

Musk has acknowledged a “huge drop” in income whereas the social media firm’s development prospects look unsure. That doesn’t bode effectively for Twitter’s annual curiosity burden, which is estimated to be $1.2 billion a 12 months. The billionaire additionally alluded to loosening insurance policies that limit free speech, a threat that’s spooking advertisers.

The Twitter financing package deal additionally includes $6 billion of junk bonds cut up evenly between secured and unsecured notes and a $500 million mortgage referred to as a revolving credit score facility.

Junk bond and leveraged mortgage yields have surged since April, that means that Wall Road banks threat dropping cash on massive buyouts after having agreed to offer financing at decrease yields than the market will settle for now. Lenders have already sustained billions of {dollars} of writedowns and losses this 12 months after central banks worldwide have began mountaineering charges to tame inflation.

Moody’s Buyers Service not too long ago minimize Twitter’s score two notches to B1, or 4 steps into junk territory. The company cited a considerable enhance in debt and discount of money in addition to governance for score motion.

“Twitter’s governance threat is very destructive reflecting Moody’s expectation for aggressive monetary insurance policies and concentrated possession by Elon Musk,” the scores agency mentioned.

–With help from Gowri Gurumurthy and Lisa Lee.

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