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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, Bank of America, and
Barclays Plc, 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.
In September, 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
after failing to find buyers.
(Reporting by Anirban Sen and Shankar Ramakrishnan in New York;
Additional reporting by Sheila Dang, Abigail Summerville and
Matt Tracy; Editing by Josie Kao)
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