Funding Secured? Musk Looks To Completely Scrap Tesla Margin Loan For Twitter Purchase

Funding Secured? Musk Looks To Completely Scrap Tesla Margin Loan For Twitter Purchase

Elon Musk isn’t about to let Twitter slip away.

According to Bloomberg, Musk is in talks to raise enough equity and preferred financing to eliminate the need for a $6.25 billion margin loan, according to people with knowledge of the matter.

The billionaire’s advisers, led by Morgan Stanley, have begun soliciting interest from potential investors for as much as $6 billion in preferred equity financing, the people said, asking not to be named discussing a private transaction.

Musk had originally teed up a $12.5 billion margin loan. However, that loan was halved to $6.25 billion after he said last week that he secured $7.1 billion in equity commitments from investors including Larry Ellison, Sequoia Capital, Qatar Holding and Saudi Prince Alwaleed bin Talal, with the latter rolling his Twitter stock into the deal. Since then, he’s received commitments for another $1 billion in equity, and is in talk for more, one of the people said. -Bloomberg

If Musk is able to secure the preferred financing, he can ditch the margin loan – eliminating much of the risk associated with the buyout for both the billionaire CEO and his lenders.

Tesla stock, meanwhile, has tumbled more than 25% since Musk’s announcement regarding his desire to buy Twitter.

According to the report, the preferred equity may have a 20 year maturity, as well as a feature which would allow interest to be paid in kind at 14%. The rate would be raised by 75 basis points in the 7th, 8th and 9th year. Alternatively, the financing may be structured with a 10% interest rate plus warrants.

What’s more, Musk may have the option to block any transfers of the preferred transfers.

Earlier this week, Bloomberg reported that Apollo Global Management was in talks to lead a preferred financing of Musk’s Twitter buyout, which would be arranged by Morgan Stanley and may include Sixth Street Partners, among others. This is on top of the $7.1 billion secured from the aforementioned investors.

Preferred equity is a hybrid of debt and equity capital, sitting above common equity in the capital structure.

“You are stepping back from the publicly traded markets, so are getting the benefit of illiquidity and getting downside protection because the world is uncertain from a geopolitical and an economic point of view,” Appolo CEO Marc Rowan told Bloomberg.

Musk is the world’s richest person with a net worth of $224.5 billion as of this writing, according to Forbes.

Tyler Durden
Thu, 05/12/2022 – 12:35

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