Twitter has made its first $300mn curiosity fee on the $13bn of debt that Elon Musk used to purchase the social media platform, in line with individuals briefed on the matter.
The corporate settled the quarterly curiosity fee on Friday with a bunch of seven lenders led by Morgan Stanley, the individuals stated. The looming bill had been carefully watched as the primary huge check of Musk’s monetary stewardship of Twitter and as issues about its monetary well being have mounted.
The banks, which additionally embrace Financial institution of America and Barclays, loaned Twitter $13bn to assist fund Musk to take Twitter personal in a $44bn deal that closed in October. The package deal consisted of a $6bn mortgage together with about $7bn of bridge loans and an unsecured credit score facility.
The corporate should pay annual curiosity of about $1.5bn in quarterly instalments.
The lenders have been caught holding the debt as exterior traders have been cautious about shopping for it, because of controversies surrounding Musk’s possession of the location, declining revenues and rising rates of interest.
Analysts at Wedbush Securities estimated Twitter was at present value about $15bn, far beneath the $44bn Musk paid for it.
The fee of the curiosity has been carefully adopted given Twitter’s issues since Musk acquired it. Revenues dropped about 40 per cent from a 12 months in the past within the ultimate quarter of 2022, his first months in cost, in line with studies, as advertisers pulled spending over issues about content material moderation and hate speech.
Musk has raced to chop prices, firing half the corporate’s employees, and has repeatedly warned Twitter might collapse into chapter 11. “This firm is such as you’re in a aircraft that’s headed in the direction of the bottom at excessive pace with the engines on fireplace and the controls don’t work,” he stated final month.
The enterprise has a money place of about $1bn, Musk has stated. He has additionally warned that its internet money outflow might be about $6bn this 12 months with out extra cost-saving measures.
If Twitter defaulted on its debt curiosity funds it could most likely be compelled to file for chapter and start a protracted and costly debt restructuring course of, during which all of its fairness shareholders, the biggest of which is Musk, would have their shareholdings successfully worn out.
One of many bankers near the debt deal stated the fee got here as a aid as there have been severe doubts that Twitter would have the ability to make it. The particular person added that there had been discussions internally at his financial institution about probably proudly owning the social media firm in an indication that they have been making ready for a default.
Nonetheless, a second banker near the deal stated earlier this month that his financial institution anticipated Twitter to satisfy the fee as a result of it was “fairly minimize and dry” {that a} default would end in a painful chapter course of.
