Elon Musk’s Bankers Consider Tesla Margin Loans to Cut Risky Twitter Debt
Elon Musk’s banker is considering replacing some of the high-interest debt he has placed on Twitter Inc. with a new margin loan backed by Tesla Inc. shares that he is personally responsible for paying, according to the information of those who have knowledge of this matter. Collateral loans are among several options that a banking consortium led by Morgan Stanley and Musk’s advisers discussed to reduce the $13 billion in debt Musk used to buy the social media company in October, it said Confidential discussion.
Banks in talks to provide margin loans to reduce Twitter debt
Commercial banks had to finance all of their debt with their own cash due to a decline in the credit market. Additionally, a rough start at the start of the takeover forced financial institutions to finance all of the debt tranche themselves. Meanwhile, Twitter could face an annual interest cost of $1.2 billion if the debt persists. This figure is significantly greater than the revenue of social networking companies throughout 2021.
Discussions are aimed at how to replace $3 billion worth of unsecured debt, sources reveal. Specifically, the CEO pays a 22.75% interest rate on unsecured debt. For now, negotiations are still ongoing and no specific decision. The question is whether the margin loan against Tesla stock will help Elon manage his debt. Looking at the situation, it’s going well, as the billionaire has investments on Twitter’s part.
People also added that margin loans mean Elon Musk won’t have to pay higher interest rates than unsecured debt. About $6.5 billion in term loans and $3 billion in secured bonds are also part of Twitter’s debt, and the anonymous source added that the banking group would not release any debt until the coming year. By then, Twitter will be able to see a clearer picture of where it is since the acquisition and a series of changes by its new CEO.
In other Twitter news, the social networking company recently banned Ye for inciting violence. The American rapper posted a swastika on the Star of David shortly after he was first cut from the app’s suspension.
What is the opinion of Elon Musk?
Billionaire Elon Musk’s banker is considering giving Tesla Inc’s chief executive officer a new margin loan backed by the U.S. automaker’s stock. Margin loans are among the options that a banking consortium led by Morgan Stanley and Musk’s advisers have discussed to alleviate the $13 billion in debt Twitter has taken as part of its $44 billion deal. Musk, the report cited people with knowledge of the matter.
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So far, discussions have focused on replacing the $3 billion in unsecured debt that Twitter paid at an interest rate of 11.75 percent, the highest level the bank agreed to finance acquisition in April.
Final decision of Elon Musk:
Musk closed the deal with $13 billion in bank loans and $33.5 billion in capital commitments, including his 9.6% stake in Twitter worth $4 billion and $7.1 billion from investors in total. To Larry Ellison, Co-Founder of Oracle Corp, and Prince Alwaleed bin Talal of Saudi Arabia.
