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Twitter Buyout Loans Get Bid at 60 Cents as Banks Sound Out Investors

dragontamer 4y ago
I imagine that Elon Musk could just buy back the debt at $7.8 Billion, wiping out the $13 Billion debt (and associated $1.3 Billion/year interest rate charges). 60-cents per dollar of debt is quite cheap. TSLA shareholders probably won't be happy (since Elon would have to probably sell $7.8 Billion of Tesla shares for this to work out). But when you've got hundreds-of-billions of TSLA shares, it makes sense to leverage them in a way that's beneficial to you...
- BulgarianIdiot 4y ago
  > I imagine that Elon Musk could just buy back the debt at $7.8 Billion, wiping out the $13 Billion debt Jeez, I wonder how that'd go: Banks: ELON WON'T BE ABLE TO PAY BACK HIS DEBT. SELL IT TO ANYONE RELIABLE WITH 40% LOSS! Elon: Oh hi, I wanna buy it. Banks: We said someone reliable! And with 40% loss, not 100% loss, moron! Go back to tweeting!
- sschueller 4y ago
  He can just have Tesla buy it just like they bought solar city. Didn't seem to have been an issue for him so far. /s
- jasmer 4y ago
  He could but does he really want to go all-all-all in?
  - dragontamer 4y ago
    He's already $33 Billion in the hole. what's another $8ish Billion to make it possible for Twitter to actually become profitable? The $1.3 Billion/year interest payment has to be the biggest existential threat to Twitter. Besides, going from $13 Billion in debt to $8ish Billion is a smoother $5 Billion in basically profits. Twitter has to pay those debts back eventually, why not right now when the debt is so so so cheap?
    - jasmer 4y ago
      Because it's a lot of money and I suggest he's not able to conjure up billions - after taxes especially - quite so easily. Though as you suggest it is a problem not just an opportunity and his hand might be forced. Financing operations aside, it does not look good for him, and the dynamics that made Musk into what he is ... well ... none of that exists at Twitter really. Other than very direct leverage he has. I feel this will be a bridge too far, he's Putin invading Ukraine and most likely outcome is some kind of 'net netural' that he will spin as a victory. But who knows? Probably not even him at this point.
      - belval 4y ago
        > he's Putin invading Ukraine I get that he's not the most tasteful individual out there, but this seems like a questionable parallel to draw.
    - miohtama 4y ago
      $1.3B/year interest payments is still likely to go up if the interest rates keep raising.
- JumpCrisscross 4y ago
  > 60-cents per dollar of debt is quite cheap These loans are almost certain to be restructured. Twitter was the last cycle’s top-tick buyout. Everyone realised it within weeks of the signing, which is why Elon expended so much effort trying to bust the deal. (The psychopathic move would be to red line the company, thereby tanking the bonds’ value, before putting in a Hail Mary bottom-barrel bid.)
  - BulgarianIdiot 4y ago
    > Twitter was the last cycle’s top-tick buyout Can you please unroll the meaning of "last cycle's top-tick buyout" for us, please. Thanks.
    - dredmorbius 4y ago
      Peak-of-the-bubble transaction is my interpretation. In the game of musical chairs, the creditors are left standing. In the game of hot potato, they're holding the bag.
  - actionablefiber 4y ago
    > (The psychopathic move would be to red line the company, thereby tanking the bonds’ value, before putting in a Hail Mary bottom-barrel bid.) Musk's counterparties are not, like, salt-of-the-earth everyday people, they are exactly the kind of people and institutions that are referred to by the term "sophisticated investors." It would certainly be the kind of play that guarantees that no one will want to do business with him ever again, but I'm not so sure it crosses into psychopathic territory, just normal selfishness. I think psychopathic would be to start kicking his counterparties' management's dogs until they agreed to sell the debt to him for 5¢ on the dollar.
- c7b 4y ago
  If he still believes he can turn it around, that would be quite a bargain indeed. Should Twitter not make it, it'd be throwing good after bad money, however (unless he can pay it out of Twitter's funds, I don't know what their balance sheet looks like).
  - thoughtstheseus 4y ago
    He funded it with Tesla equity sales so it seems quite cheap to me. He sells a small piece of his Tesla stake and gets Twitter? Why not…
- watwut 4y ago
  I kinda feel like that if it is possible to make massive debt, intentionally mismanage situation so that no one believes you will pay and the buy own debt for cheap ... then something is super wrong with financial system. We are used that it allows massive frauds ... but there should be limits to magic.
infotogivenm 4y ago
This is from 2 weeks ago?
- BulgarianIdiot 4y ago
  It is, which is impressive because 2 weeks ago we only had initial hints of the shipwreck that Elon's leadership at Twitter will be. But banks sniffed it early and immediately tried to offload the loans with 40% LOSS.
  - Proven 4y ago
grugagag 4y ago
https://news.ycombinator.com/item?id=33730985 https://news.ycombinator.com/item?id=33730985

I imagine that Elon Musk could just buy back the debt at $7.8 Billion, wiping out the $13 Billion debt (and associated $1.3 Billion/year interest rate charges). 60-cents per dollar of debt is quite cheap. TSLA shareholders probably won't be happy (since Elon would have to probably sell $7.8 Billion of Tesla shares for this to work out). But when you've got hundreds-of-billions of TSLA shares, it makes sense to leverage them in a way that's beneficial to you...

BulgarianIdiot 4y ago
> I imagine that Elon Musk could just buy back the debt at $7.8 Billion, wiping out the $13 Billion debt Jeez, I wonder how that'd go: Banks: ELON WON'T BE ABLE TO PAY BACK HIS DEBT. SELL IT TO ANYONE RELIABLE WITH 40% LOSS! Elon: Oh hi, I wanna buy it. Banks: We said someone reliable! And with 40% loss, not 100% loss, moron! Go back to tweeting!
sschueller 4y ago
He can just have Tesla buy it just like they bought solar city. Didn't seem to have been an issue for him so far. /s
jasmer 4y ago
He could but does he really want to go all-all-all in?
- dragontamer 4y ago
  He's already $33 Billion in the hole. what's another $8ish Billion to make it possible for Twitter to actually become profitable? The $1.3 Billion/year interest payment has to be the biggest existential threat to Twitter. Besides, going from $13 Billion in debt to $8ish Billion is a smoother $5 Billion in basically profits. Twitter has to pay those debts back eventually, why not right now when the debt is so so so cheap?
  - jasmer 4y ago
    Because it's a lot of money and I suggest he's not able to conjure up billions - after taxes especially - quite so easily. Though as you suggest it is a problem not just an opportunity and his hand might be forced. Financing operations aside, it does not look good for him, and the dynamics that made Musk into what he is ... well ... none of that exists at Twitter really. Other than very direct leverage he has. I feel this will be a bridge too far, he's Putin invading Ukraine and most likely outcome is some kind of 'net netural' that he will spin as a victory. But who knows? Probably not even him at this point.
    - belval 4y ago
      > he's Putin invading Ukraine I get that he's not the most tasteful individual out there, but this seems like a questionable parallel to draw.
  - miohtama 4y ago
    $1.3B/year interest payments is still likely to go up if the interest rates keep raising.
JumpCrisscross 4y ago
> 60-cents per dollar of debt is quite cheap These loans are almost certain to be restructured. Twitter was the last cycle’s top-tick buyout. Everyone realised it within weeks of the signing, which is why Elon expended so much effort trying to bust the deal. (The psychopathic move would be to red line the company, thereby tanking the bonds’ value, before putting in a Hail Mary bottom-barrel bid.)
- BulgarianIdiot 4y ago
  > Twitter was the last cycle’s top-tick buyout Can you please unroll the meaning of "last cycle's top-tick buyout" for us, please. Thanks.
  - dredmorbius 4y ago
    Peak-of-the-bubble transaction is my interpretation. In the game of musical chairs, the creditors are left standing. In the game of hot potato, they're holding the bag.
- actionablefiber 4y ago
  > (The psychopathic move would be to red line the company, thereby tanking the bonds’ value, before putting in a Hail Mary bottom-barrel bid.) Musk's counterparties are not, like, salt-of-the-earth everyday people, they are exactly the kind of people and institutions that are referred to by the term "sophisticated investors." It would certainly be the kind of play that guarantees that no one will want to do business with him ever again, but I'm not so sure it crosses into psychopathic territory, just normal selfishness. I think psychopathic would be to start kicking his counterparties' management's dogs until they agreed to sell the debt to him for 5¢ on the dollar.
c7b 4y ago
If he still believes he can turn it around, that would be quite a bargain indeed. Should Twitter not make it, it'd be throwing good after bad money, however (unless he can pay it out of Twitter's funds, I don't know what their balance sheet looks like).
- thoughtstheseus 4y ago
  He funded it with Tesla equity sales so it seems quite cheap to me. He sells a small piece of his Tesla stake and gets Twitter? Why not…
watwut 4y ago
I kinda feel like that if it is possible to make massive debt, intentionally mismanage situation so that no one believes you will pay and the buy own debt for cheap ... then something is super wrong with financial system. We are used that it allows massive frauds ... but there should be limits to magic.

infotogivenm 4y ago

This is from 2 weeks ago?

BulgarianIdiot 4y ago
It is, which is impressive because 2 weeks ago we only had initial hints of the shipwreck that Elon's leadership at Twitter will be. But banks sniffed it early and immediately tried to offload the loans with 40% LOSS.
- Proven 4y ago

grugagag 4y ago

https://news.ycombinator.com/item?id=33730985 https://news.ycombinator.com/item?id=33730985