Twitter must pay about US$1.5 billion in annual interest payments. Read more.
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The company’s dire finances — it made a loss of US$221 million in 2021 before the acquisition and Musk has said revenues have declined since — have led the new owner to regularly raise the prospect that the company could crash into bankruptcy. This company is like you're in a plane that is headed towards the ground at high speed with the engines on fire and the controls don't workIf Twitter did not make its first interest payment, it would join a small but notorious club of companies dubbed “NCAA” by debt traders — short for “no coupon at all” — that includes U.S. car rental company Hertz Corp. and German payments group Wirecard AG.
Bankers and experts observing the deal said Musk was unlikely to file for bankruptcy, which would risk him losing control of the business.Article content However, bankers say Musk could attempt to improve his position by acquiring Twitter’s debt cheaply, during or outside of a bankruptcy, and later converting it to equity if he turned the site into a profitable company in the future — although this would require a willingness by the banks to sell the debt to Musk at a discount, and means he would have to write yet another cheque for Twitter if he wanted to stay in control.
The banks have been stuck holding tens of billions of dollars worth of debt from other deals struck before last year’s sell-off in financial markets — but the Twitter deal stands out given its size and the pace at which the business has deteriorated.Article content
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