San Francisco, Dec 17 (SocialNews.XYZ) Tesla and SpaceX CEO Elon Musk reportedly told bankers after taking $13 billion in loan to fund his Twitter acquisition last year that they will not lose any money on the deal.
Despite his assurances, reports the Financial Times, seven banks that lent money to Musk — Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho and Societe Generale — “are facing serious losses on the debt if and when they eventually sell it”.
The verbal guarantees by Musk “fell sharply after he completed the acquisition last year”.
“The banks have held the debt on their balance sheets instead of selling at a steep loss in the hope that X’s performance will improve following a series of cost-cutting measures,” the report mentioned.
The debt is split between $6.5 billion of term loans, as well as $6 billion of senior and junior bonds and a $500 million revolver.
There was no guarantee the banks would be able to offload the debt even in 2024, according to the report.
Lenders are unlikely to get even 60 cents on the dollar for the bonds and loans.
Meanwhile, the X platform under Musk has seen its ad share nosediving, and the company may generate $2.5 billion this year, missing the internal targets of $3 billion.
Bloomberg reported last week that ad sales on X are about a half billion lower than anticipated for 2023, as several top advertisers left the platform for his support for antisemitism.
X generated a little more than $600 million in advertising revenue in each of the first three quarters of the year, and is anticipating a similar performance in the current period.
The company earned more than $1 billion per quarter in 2022.
The loans Musk took out to buy Twitter (now called X) was about $13 billion and the social media company has to pay about $1.2 billion in interest payments every year.
As big advertisers quit the platform and X cannot pay the interest on its loans or pay employees, then it could actually go bankrupt.
Source: IANS
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