According to people familiar with the matter, the banks providing $13 billion in financing for Tesla CEO Elon Musk’s acquisition of Twitter Inc (TWTR.N) have abandoned plans to sell the debt to investors due to uncertainty surrounding the social media company’s fortunes and losses.
The banks do not intend to syndicate the debt, as is common with such acquisitions, and instead intend to keep it on their balance sheets until there is more investor appetite, according to the sources.
Morgan Stanley, Bank of America, and Barclays Plc (BARC.L) have all declined to comment. Musk and Twitter representatives did not immediately respond to requests for comment.
Musk agreed to buy Twitter for $44 billion in April, before the Federal Reserve began raising interest rates to combat inflation. In the eyes of credit investors, this made the acquisition financing appear too cheap, so the banks would have to take a financial hit totaling hundreds of millions of dollars to get it off their books.
Uncertainty about the deal’s completion also prevented the banks from marketing the debt. Musk has attempted to back out of the deal, claiming Twitter misled him about the number of spam accounts on the platform, and only agreed to meet a Delaware court judge’s Oct. 28 deadline to complete the transaction earlier this month. He has not revealed details about Twitter’s new leadership or business plan, and many debt investors are waiting for more information on that front, according to sources.
The debt package for the Twitter deal includes junk-rated loans, which are risky due to the amount of debt the company is assuming, as well as secured and unsecured bonds.
Rising interest rates and general market volatility have prompted investors to avoid some junk-rated debt. For example, Wall Street banks led by Bank of America lost $700 million in September on the sale of approximately $4.55 billion in debt backed by Citrix Systems Inc.’s leveraged buyout.
After failing to find buyers, a group of banks canceled efforts to sell about $4 billion of debt that financed Apollo Global Management Inc’s deal to buy telecom and broadband assets from Lumen Technologies in September.