Banks forced to hold on to Twitter deal debt, sources say

NEW YORK, Oct 21 (Reuters) – The banks providing $13 billion in financing for Tesla Chief Executive Elon Musk’s acquisition of Twitter Inc ( TWTR.N ) have abandoned plans to sell the debt to investors amid uncertainty over the social media company’s fortunes and losses , people familiar with the matter said.

The banks do not plan to syndicate the debt as is typical with such acquisitions, instead planning to keep it on their balance sheets until there is more investor appetite, the sources said.

The banks, which include Morgan Stanley, Bank of America and Barclays Plc ( BARC.L ), declined to comment. Representatives for Musk and Twitter did not immediately respond to requests for comment.

Musk agreed to pay $44 billion for Twitter in April, before the Federal Reserve began raising interest rates in an effort to fight inflation. This made financing the acquisition look too cheap in the eyes of credit investors, so the banks would have to take a financial hit totaling hundreds of millions of dollars to get it off their books.

The uncertainty surrounding the completion of the deal also prevented the banks from marketing the debt. Musk has been trying to get out of the deal, claiming Twitter misled him about the number of spam accounts on the platform, and only agreed to follow a Delaware court judge’s Oct. 28 deadline to end the transaction earlier this month. He has not disclosed details about Twitter’s new leadership and business plan, and many debt investors are holding back until they get more details on that front, the sources said.

The debt package for the Twitter deal consists of junk-rated loans, which are risky because of the amount of debt the company is taking on, as well as secured and unsecured bonds.

Rising interest rates and broader market volatility have pushed investors away from some junk-rated debt. For example, Wall Street banks led by Bank of America took a $700 million loss in September on the sale of about $4.55 billion in debt that backed the leveraged buyout of business software company Citrix Systems Inc.

In September, a group of banks called off efforts to sell about $4 billion in debt financing Apollo Global Management Inc’s deal to buy telecom and broadband assets from Lumen Technologies after failing to find a buyer.

Reporting by Anirban Sen and Shankar Ramakrishnan in New York; Additional reporting by Sheila Dang, Abigail Summerville and Matt Tracy; Editing by Josie Kao

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