The banks could try to minimize their losses by increasing the amount of debt that is secured by collateral so that it is less risky
, may not be able to back out of the deal easily but they might have a way to minimize the hit they take.
Two people familiar with the thinking of the banking syndicate pointed to Wall Street’s experience with the financing provided to fund the buyout of business software company Citrix Systems Inc as a possible model. Morgan Stanley, Barclays, MUFG, Bank of America, Societe Generale, Mizuho and BNP Paribas declined to comment. Representatives for Musk and Twitter did not respond to requests for comment.
Musk, however, conditioned his proposal on his ability to secure debt financing and now has until Oct. 28 to close on the transaction. The debt financing package is comprised of leveraged loans, which are risky because of the amount of debt the company is taking on, as well as secured and unsecured bonds.
Usually, such ratings are sought two to three weeks before a debt sale to give the agencies time, but Begley said a shorter turnaround was possible given his firm gave a Ba2 rating to Twitter when it last issued bonds in February.
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