Elon Musk takes over Twitter

You probably read that Apollo and Sixth Street aren't interested in providing equity financing anymore, but they were only going to put up a billion dollars (can't believe I used the word only, but this is such a big purchase!). That money can be replaced.

Most of his financing was going to be in the form of debt coming from big investment banks, though. And that is still the wildcard. Originally he had a bunch of banks, including Morgan Stanley, Bank of America and Barclays on the hook. They were going to put up $12 or $13 billion of the money.

The thing is, the environment has changed dramatically since they made their commitments, because of inflation, rising rates and the economy starting to roll over. Normally, those invesment banks would package the debt and sell it to others and collect an investment banking fee. That kind of debt was an easy sell when interest rates were being pinned at zero by the Fed, because everyone was desparate for extra yield and it was risk on (the zero interest rates feed epic malinvestment, FWIW). Now, though, there is little appetite for those leveraged buyout deals because of how the environment has changed, so those investment banks aren't going to be able to sell the debt unless they are willing to do it at a loss. They are totally screwed.

That is what is at the heart of what is going on behind the scenes right now. ... Those banks are probably balking, and Musk, as shifty as he is, is probably trying to find a way to say that he is having financing problems in order to try to reneg all over again. Twitter knows this, and is likely trying to get the judge in the case make him get letters from the banks saying that they are still committed to financing the sale. The banks for their part could argue that Musk's BS has damaged Twitter's business as a way to try to get out of their commitments, in which case the judge could force Musk to sue the banks to make them follow through on the financing they had commited to. There are so many moving parts. One thing is clear, the judge in the case was not going to let him off the hook. Also, as you said in an earlier post, it seems pretty clear that he did not want to face a deposition, and who knows why.

 

Twitter wants a guarantee that if they drop the litigation he isn't going to reneg all over again. They don't trust him. The problem is that hge doesn't have the debt financing part in hand, so they are afraid that his next line of bullshit is going to be, "I couldn't get the financing, so sorry, no can do."