Bank / Credit Union
Banks holding Elon Musk's debt for Twitter deal
November 1, 2022
A few banks, including Morgan Stanley, Bank of America and Barclays, are providing Elon Musk, CEO of Tesla Motors, $13 billion in financing in order to acquire Twitter Inc.
However, those banks have decided to hold onto the debt due to uncertainty on Twitter's financial future, according to a Reuters report.
Rather than selling the debt to investors, the banks will keep it on their balance sheets and there are a variety of reasons behind the decision. First of all, when the Federal Reserve raised interest rates, credit investors began viewing Musk's initial acquisition financing as too cheap. Second, there has been a lot of uncertainty about whether Musk would accept the Twitter deal, and he only went through with it when a Delaware court judge set an Oct. 28 deadline to close the transaction.
In addition, Musk has not revealed details about Twitter's leadership and business plan, so debt investors are waiting to see what happens. Musk's debt package is also composed of junk-rated loans and secured and unsecured bonds. Due to rising interest and market volatility, many investors are more cautious with junk-rated debt.
The banks will likely hold onto the debt until they can find interested investors, according to the report.
