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Elon Musk’s Twitter purchase bill is coming to an end, and the billionaire faces unacceptable choices in the company’s hefty pile of debt, from bankruptcy proceedings to selling another high-priced Tesla stake. I’m here.
Three people close to the entrepreneur’s acquisition of Twitter said the first installment of interest payments related to the $13 billion in debt he used to fund the acquisition could come as early as the end of January. said. This debt means the company has to pay about $1.5 billion in annual interest payments.
The Tesla and SpaceX chiefs landed in a $44 billion deal to take Twitter private in October by securing huge debt from a banking syndicate led by Morgan Stanley, Bank of America, Barclays and Mitsubishi. provided funding. The $13 billion in debt is held by Twitter at the corporate level and is not personally guaranteed by Musk.
Since the acquisition, Musk has sought new revenue streams, such as launching the Twitter Blue subscription service, while competing to cut costs, including laying off half of the company’s staff.
It lost $221 million in 2021 before the acquisition, and Musk said earnings have since declined. are raised on a regular basis.
How Musk will handle the impending interest payments will be an important test of his leadership at Twitter, which has so far been marked by a chaotic management team that alienates corporate advertisers.
“This company is like being on a plane that’s on fire and the controls are going fast to the ground with the engine on fire,” Musk said last month.
If Twitter didn’t make the first coupon payment, a small but infamous debt trader called “NCAA” for “No Coupon At All” by debt traders such as US car rental company Hertz and German payment group Wirecard. Join the company group.
financial times
Such a default would likely lead to Twitter’s management filing for bankruptcy, at which point US courts would begin an expensive and bureaucratic debt restructuring process.
Musk could have avoided this fate by liquidating interest from Twitter’s dwindling cash reserves, or by selling shares in the company to pay for it. The business has a cash position of about $1 billion, Musk said. He also warns that next year’s net cash outflow could be about $6 billion without additional cost-cutting measures.
Higher interest rates mean more and more debt, and at the same time hurt Twitter’s corporate value.
