Reports have emerged suggesting that Elon Musk’s bankers are considering the idea of replacing some of the high-interest debt the Tesla CEO took on for his Twitter acquisition with new margin loans that are backed by Tesla shares.
Margin loan commitments backed by Tesla stock worth about $12.5 billion were part of Musk’s initial financing package for Twitter. These were later replaced by additional equity commitments, however, which included investments from several partners.
Citing individuals reportedly familiar with the matter, Bloomberg News noted that the new Tesla margin loans are among several options that Musk’s advisers and his bankers have discussed. The idea is reportedly being pondered as a way to soften the burden of the $13 billion debt that Twitter took on amidst Musk’s $44 billion acquisition of the social media company.
As per the publication’s sources, the current conversations between the bankers and Musk’s advisers have so far been focused on how to replace the $3 billion in unsecured debt on which Twitter pays an interest rate of 11.75%. This was the maximum the Tesla CEO was guaranteed by the banks when they agreed to finance Musk’s Twitter acquisition earlier this year.
Any new margin loans against Tesla shares would be taken by Musk in his own capacity, despite the fact that the $13 billion in debt the CEO took on to finance his buyout of the social media company is held at the corporate level by Twitter. Despite this, the swap could still be advantageous as a significant portion of Musk’s fortune is tied up in Twitter. The margin loans would also have a lower interest rate than Twitter’s unsecured debt, according to Bloomberg’s sources.
The talks between Musk’s bankers and advisers are reportedly still in their preliminary stages, so no final decisions have been made yet. Representatives for Elon Musk and his bankers, which include Morgan Stanley, Bank of America Corp., and Barclays Plc, among others, have not issued a comment about the matter as of writing.
I’d like to hear from you. Contact me at maria@teslarati.com or via Twitter @Writer_01001101.
