Twitter’s bankruptcy is not for now. The company made the first interest payment on Elon Musk’s $12.5 billion debt to take the social network private. The company paid a group of seven banks, led by Morgan Stanley.
Avoid non-payment at all costs
According to experts contacted by Bloomberg and the Financial Times, Twitter’s first payout was $300 million. It was made on January 27, three months after the sale of the company to Elon Musk was completed. This first payment was followed by market operators, revealing the financial management of the company by the billionaire.
Since taking office, revenue is down about 40% in the last quarter of 2022 compared to a year earlier. More than 75 of the social network’s top 100 advertisers are gone. The controversial statements and decisions of the billionaire who, for example, brought Donald Trump back, are being questioned.
Elon Musk has also been quick to cut costs: dismissing half of the company’s staff, stopping rent payments for several social network premises… He has also warned on several occasions that Twitter could fail. ” This company is like being in a plane heading towards the ground at high speed with engines blazing and controls inoperative. he said last month during a Spaces on the platform.
Still, Twitter has about $1 billion in cash, the billionaire said. He also warned that its net cash outflow could be about $6 billion in 2023 without further cost-cutting measures.
Banks, including Bank of America and Barclays, have lent Twitter $12.5 billion to help Elon Musk. The company owes annual interest payments of approximately $1.5 billion in quarterly installments.
In the worst-case scenario, if Twitter defaulted, the company would be forced to file for bankruptcy and embark on a restructuring process in which all shareholders, including Elon Musk, would see their stakes severely devalued. According to sources of Financial Timesone of the bankers close to the debt deal said that ” the payment was a relief, as there were serious doubts about Twitter’s ability to carry it out He added that there had been internal discussions at his bank about acquiring ownership of Twitter, a sign that it was preparing for a default. If the situation does not improve for the social network, its debt payments are likely to return on the table every quarter.
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