- Seven banks loaned Elon Musk $13 billion to support the blockbuster buyout of Twitter last year.
- Now, Musk is under pressure to assure lenders there won’t be losses to their investment.
- Banks are already expected to lose at least $2 billion if they were to sell the debt, WSJ reported.
Elon Musk has been telling some bankers who supported his blockbuster buyout of Twitter last year with a $13 billion loan that they will not lose money on the deal, five people familiar with the situation told The Financial Times.
That’s a bold promise considering banks are already set to lose about $2 billion if they offload the debt right now, The Wall Street Journal reported in October.
To fund a $44 billion purchase of Twitter last year, Musk sought various sources of loans, including $13 billion from seven banks: Bank of America, Barclays, BNP Paribas, Mizuho, Morgan Stanley, and Société Générale.
The purchase itself was a risky bet. Twitter was a negative cash-flow business, and when Musk decided to follow through with the deal last October, lenders already expected to face losses in their investment. They, of course, knew that risk.
“The real value is the relationship with Elon Musk,” Angelo Zino, a senior industry analyst at CFRA, told Business Insider last year.
But nine months after the purchase, Musk said that Twitter, now X, is “still negative cash flow,” partly due to a roughly 50% drop in advertising revenue.
Advertisers on the platform, including IBM, Apple, Walmart, and Disney, jumped ship after a recent antisemitic comment by Musk on the platform, which the billionaire later conceded in an interview at the New York Times’ DealBook summit was “literally the worst and dumbest post that I’ve ever done” — after telling advertisers who left the platform to “go fuck yourself.”
It’s unclear when Musk made promises to bankers that they wouldn’t lose money on the deal, the Financial Times reported. According to the report, one person involved in the Twitter purchase said that the banks may be unable to offload their debt in 2024, meaning they’ll have to keep the debt on their balance sheets at a steep discount.
Musk and a spokesperson for X did not immediately respond to a request for comment sent outside working hours.
