Elon Musk on Friday promised to acquire Twitter Inc. finalize.
Elon Musk pledged Monday to complete the acquisition of Twitter Inc. by Friday in a videoconference call with bankers helping fund the deal, according to those with knowledge of the matter.
The banks, which are providing $13 billion in debt financing, have finished drafting the final credit agreement and are in the process of signing the documentation, one of the last steps before the money is actually sent to Musk, the people said, who are not asked to mention when discussing a private transaction.
Twitter shares jumped on the news, trading as high as $53.18, near Musk’s $54.20 acquisition price.
Wall Street lenders, led by Morgan Stanley, have been preparing to fund the debt in recent weeks, Bloomberg previously reported. But nothing is ever certain with Musk, the mercurial billionaire who tried to pull out of the deal just weeks ago. These latest developments suggest he is in the final stages of closing the transaction by a court-set deadline of October 28.
The banks are expected to receive one of the final formalities – a loan notice – on Tuesday, and the money is expected to be held on Thursday, the people said.
Morgan Stanley and Twitter declined to comment, while representatives for Musk did not respond to a request for comment.
During the call, Musk also pledged to help banks market debt to money managers after the deal closes, the people said.
That’s key for the group of seven banks, abandoned after Musk’s sudden turnaround, to continue buying Twitter in early October. Normally, the banks would transfer debt commitments to money managers in the form of junk bonds and leveraged loans before a deal is made, but the compressed timeline and a global deterioration in credit conditions have forced them to keep the debt on their books.
In a normal buyout transaction, the banks, the new owner and company management would meet to hold talks with investors to sell the debt and pitch the company. But the original debt-pledging letter stated that Musk’s side would help up to 30 days after closing, and that Musk would participate in investor meetings for up to two hours.
Banks face paper losses of about $500 million on the transaction — pain that would be realized once the debt is sold to institutional investors. The average cost of borrowing this year, along with rising inflation, recession fears and geopolitical turmoil, rose well above the 11.75% maximum interest rate that banks promised Musk on the riskiest tranche of debt, leaving them ahead of the curve. kept the difference. According to data from the Bloomberg Index, junk bonds with a triple-C rating trade at about 15.8% on average.
Wall Street banks have already had to use about $30 billion in their own cash this year to fund loans for acquisitions and buyouts they couldn’t transfer to investors. That would rise to more than $40 billion once banks fund the Twitter deal on Friday, as expected.
Twitter’s total purchase price is $44 billion. The banks pledged to provide debt financing in April — when investor interest in risky assets grew — and originally hoped to sell $6.5 billion in leveraged loans and $6 billion in junk bonds, divided equally into secured and unsecured tranches.
They also provided $500 million of a special type of loan commonly held by banks called a revolving credit facility, which Twitter can borrow and repay until maturity.