Musk’s renewed Twitter bid puts strain on lenders

$44B offer may be more costly for investment banks backing billionaire’s deal

Elon Musk’s planned acquisition of Twitter looked like the deal of the year back in April. Investment banks and Silicon Valley bigwigs clamored to be a part of it. Moved by his lofty promises and past successes, they collectively promised billions to Musk, the world’s richest man.

Then Musk tore it all up.

He announced in July that he no longer wanted go through with his bid, and he publicly thrashed the company he had asked for help in buying.

But, on Monday night, Musk said that he had changed his mind once again and that he still wanted to buy Twitter, a company under more duress than it was in the spring and operating in an economy that looks much shakier.

Now the $44 billion deal — the same amount Musk offered in April — could be significantly more costly for lenders such as Morgan Stanley, Bank of America and

Barclays that committed to put big money into the deal before inflation, rising interest rates, economic uncertainty created by the war in Ukraine and Musk’s bombastic behavior.

After Musk informed Twitter of his new intent to follow through on the deal, the two sides began to hash out the details, with negotiations still ongoing, said a person with knowledge of the situation who was not authorized to speak publicly about the confidential talks.

A question looming over the negotiations is whether Musk will try to use the banks’ potential issues with financing to get out of a deal with Twitter, if the company does agree to his new offer.

In a letter to Twitter, he said he would complete the deal “pending receipt of the proceeds of the debt financing.”

Musk can walk away from the deal with a $1 billion breakup fee if his debt financing falls apart. While an expensive prospect, it would be far less costly than buying Twitter for $44 billion.

“Financing has always been a bit of a wild card in this,” said Eric Talley, a professor at Columbia Law School. “That’s always been a secret weapon that Musk might have had up his sleeve: that suddenly the lenders walk in and say that we’re not willing to finance it.”

Musk cobbled together financing through a variety of sources, including his own money. He raised $12.5 billion from banks, with Morgan Stanley, Bank of America and Barclays each committing to $2.5 billion. Other banks, including BNP Paribas and Mizuho, have committed to smaller amounts.

Typically, when investment banks fund a leveraged buyout, they try to offload that debt to outside investors, such as hedge funds and other big institutions. The banks make money from the fees they charge to arrange these deals, and they sell the debt to reduce their risks in case borrowers cannot repay what is owed.

It has become harder to sell that debt in recent months, which presents a challenge to the banks. If they try to sell the debt now, they might be forced to do so at a large loss.