{"id":45264,"date":"2023-01-22T15:45:20","date_gmt":"2023-01-22T15:45:20","guid":{"rendered":"http:\/\/www.brandon.ddtest.info\/multisite-test\/is-elon-musks-twitter-in-too-much-trouble-to-cover-its-debts-twitter\/"},"modified":"2023-01-22T15:45:20","modified_gmt":"2023-01-22T15:45:20","slug":"is-elon-musks-twitter-in-too-much-trouble-to-cover-its-debts-twitter","status":"publish","type":"post","link":"http:\/\/www.brandon.ddtest.info\/multisite-test\/is-elon-musks-twitter-in-too-much-trouble-to-cover-its-debts-twitter\/","title":{"rendered":"Is Elon Musk\u2019s Twitter in too much trouble to cover its debts? | Twitter"},"content":{"rendered":"

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Elon Musk sold a statue of Twitter\u2019s bird logo last week for $100,000<\/a> \u2013 and he needs the money. The social media platform that he owns reportedly faces an interest payment of about $300m (\u00a3242m) on its debt this week, amid difficult financial conditions for the company.<\/p>\n

Twitter has been a loss-making business, even in the good times, but its problems have worsened since it was bought by the Tesla chief executive less than three months ago<\/a>. Musk himself has raised the spectre of Twitter entering chapter 11 bankruptcy<\/a>, although he has since played that prospect down. How much trouble is Twitter in, months after it was bought by the world\u2019s second richest man?<\/p>\n

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How much money must Twitter pay banks next week?<\/h2>\n

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According to reports, the first quarterly payment on the $13bn worth of debt used by Musk to buy Twitter<\/a> must be paid by the end of the month. Analysts put the amount at approximately $300m, or a quarter of the estimated $1.2bn in annual interest payments due.<\/p>\n

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The debt, which sits on Twitter\u2019s balance sheet and is loaned by a consortium of banks led by Morgan Stanley, comprises: a $6.5bn senior secured term loan facility (a bank loan); a $3bn senior secured bridge loan facility (a loan to tide over the company post-acquisition that, conventionally, is paid off with the proceeds of a bond issue); and a $3bn senior unsecured bridge loan facility. Twitter also has a $500m senior secured revolving facility, which is effectively a corporate overdraft.<\/p>\n

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Can Twitter afford the $300m payment?<\/h2>\n

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Musk warned soon after taking over Twitter that the company could go bankrupt. He also revealed a sharp drop in advertising revenue<\/a>, which accounts for 90% of Twitter\u2019s turnover, caused by clients\u2019 concern over moderation standards post-takeover and a botched relaunch of Twitter\u2019s subscription service, which led to a rash of fake \u201cverified\u201d corporate accounts<\/a>.<\/p>\n

The advertising situation has not improved. It was reported last week that Twitter\u2019s daily revenue has slumped by 40%<\/a>. Its cashflow \u2013 a proxy of its ability to meet debt payments \u2013 is poor and in 2021 it generated negative free cashflow (spending more cash to run the business than it takes in) of $370.4m. Musk had warned that figure was heading towards $3bn this year but he now expects it to break even.<\/p>\n

Musk told a podcast last month that Twitter is \u201cnot on the fast lane to bankruptcy any more\u201d. He has also said Twitter has a net cash position of $1bn, which would at least cover next week\u2019s payment along with the $500m overdraft.<\/p>\n

\u201cTwitter should have no problem making its interest payment in late January, which could be funded with cash on hand or its revolving credit facility,\u201d says Jordan Chalfin, a senior analyst at the credit research firm CreditSights. \u201cLonger term, the company needs to turn around the business, particularly its advertising revenue, in order to service its debt.\u201d<\/p>\n

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Can Musk fund Twitter from his personal fortune?<\/h2>\n

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To buy Twitter, Musk put in more than $20bn of his own money, alongside $7.1bn from associates and about $4bn from his existing stake in the company. Last year he sold $23bn worth of shares in Tesla, presumably to fund his part of the deal. More than 60% of Musk\u2019s remaining stake in Tesla has been pledged \u201cto secure certain personal indebtedness\u201d, which leaves him with about $67bn worth of shares he can sell immediately, says Ben Silverman, director of research at VerityData.<\/p>\n

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