Twitter starts paying interest on its massive debt

Twitter has made its first interest payment on its looming debt of more than $12.5 billion, reports say by Bloomberg and the Financial Times. Elon Musk took out billions of dollars in loans in October 2022, as part of the billionaire project successful push to buy Twitter and make the social media platform private. And, through this $44 billion acquisition deal, the nearly $13 billion loan debt became Twitter’s responsibility.

The initial interest payment, due and presumably paid on Friday, likely cost the company about $300 million, according to Bloomberg. Twitter would have paid this amount to seven banks, led by Morgan Stanley, who initially provided the acquisition funds.

The company making its first interest payment on time is a good sign, or rather it is better than the alternative. But that initial $300 million is nowhere near solving the huge sum owed. According to Bloomberg’s earlier calculations, Twitter will have to pay about $1 billion in debt every year to keep up with it. Annual interest alone could top $1.2 billion, Bloomberg reported Monday. In contrast, before Musk, the company was paying around $100 million in annual interest.

Yet even before Musk’s takeover, Twitter was struggling financially. The company only had a profitable year (2019) in its almost decade as a public company. And under the leadership of the world’s second richest man, Twitter’s finances have looked even less viable. The company has lost a big chunk of its ad revenue as advertisers continue to be put off by Musk’s “free speech” principles in action. Then, of course, there is the debt.

Musk told staff in November that Twitter could go bankrupt.

In apparent attempts to deal with these extreme financial difficulties, the company did not pay rent in at least three of its offices, including its San Francisco headquarters, for months. Twitter has also resorted to selling office furniture and other auction items. The company also dismissed more than half of its employees over the last three months and reduced benefits for those who stay.

Musk claimed the above measures worked. In a Twitter Spaces presentation in late December, the billionaire said the company was on the right track almost reach the break-even point.

More recently, however, the CEO of Twitter/Tesla/SpaceX reportedly floated the idea of sell 3 billion dollars of his Twitter shares to raise funds, signaling that there could still be more commotion at the bird app.

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