Elon Musk’s Twitter bankers may be hit by riskiest debt

The lenders reached an agreement based on a maximum interest rate of 11.75% for the $3 billion unsecured part of the financing package

Elon Musk | Twitter | Morgan Stanley


A Morgan Stanley-led banking group that has agreed to provide Elon Musk with $13 billion in debt financing for his Twitter acquisition could take a hit if it were to offload the funding to investors in the current climate of risk-free market.

The lenders reached a deal based on a maximum interest rate of 11.75% for the $3 billion unsecured part of the financing package, which should be replaced by a bond with ratings at CCC level, according to a person knowing the question. Yet the average yield on similarly rated junk securities soared past 12% last week as investors retreated from risk amid fears of runaway inflation.

Selling the debt at a yield above 11.75% would force the banks to incur a lower fee they will earn for underwriting the transaction, and could lead to outright losses.

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First published: Saturday, May 28, 2022. 01:48 IST

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