Banks that lent Twitter owner and CEO Elon Musk $13 billion to purchase the platform are reportedly preparing to book losses in the current quarter.
What Happened: The banks could do so in a way that does not impact their earnings in a major way, reported Reuters, citing three sources familiar with the matter.
The largest part of the debt — $10 billion worth of loans backed by Twitter’s assets — might have to be written down by almost 20%, one of the Reuters’ sources said.
The loan, distributed among seven banks, could be managed by most of the lenders without creating a significant impact on profits, according to the report.
Meanwhile, Twitter is ramping up extreme cost-cutting measures at the company. It has stopped paying rent for its offices, including its San Francisco headquarters, reported The New York Times. It is also considering not paying severance to the thousands of workers it laid off last month.
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Why It Matters: Twitter’s lenders, including Morgan Stanley MS, could incur billions in losses if they tried to sell these loans to investors now as they are averse to purchasing risky debt during periods of economic uncertainty, noted Reuters.
Musk himself noted the dangers of debt in “turbulent macroeconomic conditions” on Tuesday.
Advertisers have pulled promotions on the Musk-led platform, fearing an increase in hate speech.
The radical cost-cutting at Twitter comes amid a litany of litigation for Musk. Laid-off workers have sued the company for failure to pay promised severance packages, reported Business Insider.
Twitter is also under investigation by the Federal Trade Commission, which is probing if it is adhering to a consent decree dating back to 2011, noted the Times.
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Image and article originally from www.benzinga.com. Read the original article here.