Washington, December 8th. Advisors Ilona Mask are considering using Tesla stock-backed loans to refinance some of Twitter’s debt. This is reported by Bloomberg, citing sources familiar with the matter.
A group of banks led by financial conglomerate Morgan Stanley and Musk’s advisers discussed the possibility of providing margin loans to alleviate the burden of $13 billion of debt. Twitter debt was formed after the billionaire acquired the social network for $44 billion.
Banks were forced to finance the entire debt package with their own funds after the worsening situation in the credit markets and Musk’s tumultuous entry into the position of chief executive of Twitter. By some estimates, the company will face an annual interest expense of around $1.2 billion if the current debt structure is maintained. This amount exceeds Twitter’s earnings for the whole of 2021.
The interest rate on the margin loan will be much lower than the 11.75% that Twitter has to pay. In addition, these borrowings will be taken by Musk personally. According to sources, the negotiations are preliminary, no decisions have been made.
Banks are not expected to try to write off Twitter’s debt, which also includes $6.5 billion in emergency loans and $3 billion in bonds. Musk said in his first message to Twitter employees after buying the company that it could go bankrupt if it doesn’t start making more money.
A number of problems that accompanied Musk’s acquisition of the social network continued after the beginning of the management of the billionaire. The company is going through a turbulent period, during which the businessman fired half of the employees, most of the top managers and banned remote work. In addition, the businessman announced a plan to loosen censorship, which has faced significant obstacles, including EU legislation.