Elon Musk pledged Monday to close the acquisition of Twitter Inc. by Friday in a video conference call with bankers helping fund the deal, according to people with knowledge of the matter.
The banks, which are providing US$13 billion of debt financing, have finished putting together the final credit agreement and are in the process of signing the documentation, one of the last steps before actually sending the cash to Musk, said the people, who asked not to be named discussing a private transaction.Twitter shares jumped on the news and traded as high as US$53.18, approaching Musk’s US$54.20 acquisition price.
The banks are expected to receive one of the last formalities -- a borrowing notice -- on Tuesday, and the cash is expected to be held in escrow on Thursday, the people said. That is key for the group of seven banks, which have been left in a lurch after Musk’s sudden reversal to go through with buying Twitter in early October. Normally the banks would offload debt commitments to money managers in the form of junk bonds and leveraged loans before a deal closes, but the compressed timeline and a global deterioration of credit conditions have forced them to keep the debt on their books.
Banks are facing paper losses of roughly US$500 million on the transaction -- pain that would be realized once the debt is sold to institutional investors. The average cost of borrowing spiked this year along with accelerating inflation, recession fears, and geopolitical turmoil, well above the 11.75 per cent maximum interest rate that the banks promised Musk on the riskiest tranche of the debt, leaving them on the hook for the difference. Triple-C rated junk bonds are trading at about 15.