5 ms·

Twitter could just declare bankruptcy and restructure.

by naveen99 4y ago

tonystubblebine 4y ago
I agree this is where things are headed. Is it a sure thing that Elon maintains control in a restructuring?
- nostrademons 4y ago
  Usually not. Typically in a bankruptcy the debtholders become the new shareholders and then replace existing management with ones more friendly to their interests.
  - hn_go_brrrrr 4y ago
    At which point Musk wouldn't own Twitter anymore, like he wanted. It sounds crazy, but is this his exit strategy?
    - mikro2nd 4y ago
      How does he recover 44B this way?
      - Retric 4y ago
        He “recovers” the value of the loans he defaults on, which could easily be worth more than Twitter at this point.
    - raverbashing 4y ago
      I dunno, I can think of cooler ways of disposing 44bi $, preferably in a non-reputation damaging way
    - mschuster91 4y ago
      Breaking apart Twitter would certainly be in the interest of Saudi-Murderabia. For the Saudis, their loan amount is petty change, and they get to destabilize the main driving force behind all major political unrest in the Arabic region and the best and most efficient way to share and spread documentation of government-committed crimes also vanishes.
  - skippyboxedhero 4y ago
    That wouldn't happen in this case because there would still be residual value in the equity. Is Twitter worth $45bn? No. Is Twitter worth more than the $13bn in debt? Yes. In this case, they can file, rollover the debt into a new company with no financial loss and then recap the equity with Musk (who obviously has the money to do so) and other shareholders. Also, the banks who own the debt do not want to run Twitter. All they want is to be able to mark the loan as performing...that is it. In cases where debtholders take over the company, the debt has usually been sold for significantly less than par to someone who wants to run the company. This isn't the case here because the debt is still worth par (imo, largely because it is obvious that a recap would be straightforward...it may be the case that Twitter's financial position is significantly worse, but we will need to wait and see). Obviously, the question for the leases is how much it is, whether it is worth it, whether the landlord thinks they can get a new tenant (unlikely at this point), and whether the company can be relocated...the lease would have to be a rather large proportion of expenses to make this all worth it...but it may be worth it if the company is going to recap anyway (which seems likely).
    - addaon 4y ago
      > Is Twitter worth more than the $13bn in debt? This might have been true on October 26th. It's not obviously true today.
    - 082349872349872 4y ago
      > Is Twitter worth more than the $13bn in debt? The banks who own the debt* do not believe so. [Edit: early article postulating 20% writedowns https://www.reuters.com/markets/us/musks-banks-book-twitter-loan-losses-avoid-big-hits-sources-2022-12-14/ https://www.reuters.com/markets/us/musks-banks-book-twitter-... recent news with 50+% as a more appropriate writedown than 20% https://www.reuters.com/technology/fidelity-marks-down-value-twitter-stake-by-56-2022-12-30/ https://www.reuters.com/technology/fidelity-marks-down-value... * because they haven't been able to sell it to anyone]
      - skippyboxedhero 4y ago
        And look at HY indexes. The marks that have been in the media are roughly where other HY bonds have moved. Banks have bids but they are seeking bids from hedge funds that trade in distressed debt, who are obviously going to bid with a markup (the same thing happened with British corporates a few months, because pension funds had to sell they had to take bids from hedge funds so the bonds went from 100 t0 90 for AAA securities because there was no bid, you had private equity funds trading at 70p in the £1 on money-good securities). The secured portion is down 10%...that looks about right based on HY indexes. The 50% markdown that Fidelity is taking means that it is worth more than $20bn. Classic HN.
- dathinab 4y ago
  Idk. about the US but normally during a restructuring the company is placed under control of a bankruptcy trustee. So at least temporary he would lose control.
- 93po 4y ago
  What are your thoughts on why this is the direction it's headed? What is your experience with dealing with bankruptcy for multibillion dollar companies?
- deleted 4y ago
  [deleted]
Bilal_io 4y ago
Filing bankruptcy doesn't sheild them from a judge order to empty the building, right?
- rgbrenner 4y ago
  It does. The rent due under the lease is debt, and creditors cannot take action to collect debt while the debtor is in bankruptcy. https://www.law.cornell.edu/uscode/text/11/362 https://www.law.cornell.edu/uscode/text/11/362 https://www.law.cornell.edu/uscode/text/11/365 https://www.law.cornell.edu/uscode/text/11/365 Edit: here's an easier to read article: https://www.jdsupra.com/legalnews/what-to-do-when-commercial-leases-end-32005/ https://www.jdsupra.com/legalnews/what-to-do-when-commercial...
- jamesliudotcc 4y ago
  It does, but only temporarily. Think of bankruptcy as fundamentally that the debt holders take over, and so a short time is given for everything to be sorted out. Creditors are paid by priority based on lien rights and some policy preferences encoded into the bankruptcy code. Nobody gets to jump ahead in line. That is what the automatic stay does--it provides the pause to make sure nobody gets to jump ahead in line. As long as the stay remains in place, the landlord (or any other creditor) is forbidden from taking steps to evict a debtor. But it is possible to get relief from the stay if you can demonstrate that you would not be jumping ahead in line, and often relief from stay motions can be heard quickly. If the debtor needs the stay in order to reorganize (the theory being that it is better to have a bigger pie) then the debtor can apply for an extension, but only if it provides "adequate protection," which generally means paying according to the terms of the contract, or supplying additional collateral, or some such. Timing is important. Once you file, all legal actions against you cease, and that is a very powerful tool. Unfortunately, you can only use that tool once. (Well, if you are a human individual, you get another chance years later.) That is a very brief sketch. I haven't been a lawyer for years. You can ask a real bankruptcy lawyer for details.
  - 2b3a51 4y ago
    UK perspective: can the landlord not instruct bailiffs to take possession of the building? Change the locks &c. This is distinct from any debts owing except that the non-payment of rent provides the grounds for obtaining a possession order. I often see the bailiff notices on defunct companies here. There is a standard form of letter that is pasted onto the door. Quite Victorian.

Twitter could just declare bankruptcy and restructure.

tonystubblebine 4y ago

I agree this is where things are headed. Is it a sure thing that Elon maintains control in a restructuring?

nostrademons 4y ago
Usually not. Typically in a bankruptcy the debtholders become the new shareholders and then replace existing management with ones more friendly to their interests.
- hn_go_brrrrr 4y ago
  At which point Musk wouldn't own Twitter anymore, like he wanted. It sounds crazy, but is this his exit strategy?
  - mikro2nd 4y ago
    How does he recover 44B this way?
    - Retric 4y ago
      He “recovers” the value of the loans he defaults on, which could easily be worth more than Twitter at this point.
  - raverbashing 4y ago
    I dunno, I can think of cooler ways of disposing 44bi $, preferably in a non-reputation damaging way
  - mschuster91 4y ago
    Breaking apart Twitter would certainly be in the interest of Saudi-Murderabia. For the Saudis, their loan amount is petty change, and they get to destabilize the main driving force behind all major political unrest in the Arabic region and the best and most efficient way to share and spread documentation of government-committed crimes also vanishes.
- skippyboxedhero 4y ago
  That wouldn't happen in this case because there would still be residual value in the equity. Is Twitter worth $45bn? No. Is Twitter worth more than the $13bn in debt? Yes. In this case, they can file, rollover the debt into a new company with no financial loss and then recap the equity with Musk (who obviously has the money to do so) and other shareholders. Also, the banks who own the debt do not want to run Twitter. All they want is to be able to mark the loan as performing...that is it. In cases where debtholders take over the company, the debt has usually been sold for significantly less than par to someone who wants to run the company. This isn't the case here because the debt is still worth par (imo, largely because it is obvious that a recap would be straightforward...it may be the case that Twitter's financial position is significantly worse, but we will need to wait and see). Obviously, the question for the leases is how much it is, whether it is worth it, whether the landlord thinks they can get a new tenant (unlikely at this point), and whether the company can be relocated...the lease would have to be a rather large proportion of expenses to make this all worth it...but it may be worth it if the company is going to recap anyway (which seems likely).
  - addaon 4y ago
    > Is Twitter worth more than the $13bn in debt? This might have been true on October 26th. It's not obviously true today.
  - 082349872349872 4y ago
    > Is Twitter worth more than the $13bn in debt? The banks who own the debt* do not believe so. [Edit: early article postulating 20% writedowns https://www.reuters.com/markets/us/musks-banks-book-twitter-loan-losses-avoid-big-hits-sources-2022-12-14/ https://www.reuters.com/markets/us/musks-banks-book-twitter-... recent news with 50+% as a more appropriate writedown than 20% https://www.reuters.com/technology/fidelity-marks-down-value-twitter-stake-by-56-2022-12-30/ https://www.reuters.com/technology/fidelity-marks-down-value... * because they haven't been able to sell it to anyone]
    - skippyboxedhero 4y ago
      And look at HY indexes. The marks that have been in the media are roughly where other HY bonds have moved. Banks have bids but they are seeking bids from hedge funds that trade in distressed debt, who are obviously going to bid with a markup (the same thing happened with British corporates a few months, because pension funds had to sell they had to take bids from hedge funds so the bonds went from 100 t0 90 for AAA securities because there was no bid, you had private equity funds trading at 70p in the £1 on money-good securities). The secured portion is down 10%...that looks about right based on HY indexes. The 50% markdown that Fidelity is taking means that it is worth more than $20bn. Classic HN.
dathinab 4y ago
Idk. about the US but normally during a restructuring the company is placed under control of a bankruptcy trustee. So at least temporary he would lose control.
93po 4y ago
What are your thoughts on why this is the direction it's headed? What is your experience with dealing with bankruptcy for multibillion dollar companies?
deleted 4y ago
[deleted]

Bilal_io 4y ago

Filing bankruptcy doesn't sheild them from a judge order to empty the building, right?

rgbrenner 4y ago
It does. The rent due under the lease is debt, and creditors cannot take action to collect debt while the debtor is in bankruptcy. https://www.law.cornell.edu/uscode/text/11/362 https://www.law.cornell.edu/uscode/text/11/362 https://www.law.cornell.edu/uscode/text/11/365 https://www.law.cornell.edu/uscode/text/11/365 Edit: here's an easier to read article: https://www.jdsupra.com/legalnews/what-to-do-when-commercial-leases-end-32005/ https://www.jdsupra.com/legalnews/what-to-do-when-commercial...
jamesliudotcc 4y ago
It does, but only temporarily. Think of bankruptcy as fundamentally that the debt holders take over, and so a short time is given for everything to be sorted out. Creditors are paid by priority based on lien rights and some policy preferences encoded into the bankruptcy code. Nobody gets to jump ahead in line. That is what the automatic stay does--it provides the pause to make sure nobody gets to jump ahead in line. As long as the stay remains in place, the landlord (or any other creditor) is forbidden from taking steps to evict a debtor. But it is possible to get relief from the stay if you can demonstrate that you would not be jumping ahead in line, and often relief from stay motions can be heard quickly. If the debtor needs the stay in order to reorganize (the theory being that it is better to have a bigger pie) then the debtor can apply for an extension, but only if it provides "adequate protection," which generally means paying according to the terms of the contract, or supplying additional collateral, or some such. Timing is important. Once you file, all legal actions against you cease, and that is a very powerful tool. Unfortunately, you can only use that tool once. (Well, if you are a human individual, you get another chance years later.) That is a very brief sketch. I haven't been a lawyer for years. You can ask a real bankruptcy lawyer for details.
- 2b3a51 4y ago
  UK perspective: can the landlord not instruct bailiffs to take possession of the building? Change the locks &c. This is distinct from any debts owing except that the non-payment of rent provides the grounds for obtaining a possession order. I often see the bailiff notices on defunct companies here. There is a standard form of letter that is pasted onto the door. Quite Victorian.